CVP Analysis

A cost which remains constant per unit at various levels of activity is a

• variable cost.
• fixed cost.
• mixed cost.
• manufacturing cost.

A fixed cost is a cost which

• varies in total with changes in the level of activity
• remains constant per unit with changes in the level of activity.
• varies inversely in total with changes in the level of activity.
• remains constant in total with changes in the level of activity.

Cost behavior analysis is a study of how a firm's costs

• relate to competitors' costs.
• relate to general price level changes.
• respond to changes in the level of business activity.
• respond to changes in the gross national product.

Contribution margin

• is always the same as gross profit margin.
• excludes variable selling costs from its calculation.
• is calculated by subtracting total manufacturing costs per unit from sales revenue per unit.
• equals sales revenue minus variable costs.

If the activity level increases 10%, total variable costs will

• remain the same.

• increase by more than 10%.

• decrease by less than 10%.

• increase 10%.

fixed manufacturing overhead is treated as a...................... under Variable costing

Under variable costing, fixed manufacturing overhead appear under..............sopl

How to calculate the Contribution Margin (CM)?

• Contribution Margin= Total Sales- Variable Cost

• Contribution Margin= Variable Cost- Total Sales

• Contribution Margin= Net Sales- COGS

What is the break-even point?

• The break-even point is the level of activity at which total revenues more than total costs (both fixed and variable cost).

• The break-even point is the level of activity at which total revenues equal total costs (both fixed and variable cost).

• The break-even point is the level of activity at which total revenues less than total costs (both fixed and variable cost).

How to calculate the quantity of goods that it should be sell in order to earn specific amount of net income?

• Required Sales in Units = (TFC+ Target Net Income) / Unit Contribution Margin

• Required Sales in Units = Breakeven quantity X selling price per unit

• Required Sales in Units = (TFC / Unit Contribution Margin