PRICOS Online Quiz #1

Cost-Volume-Profit (CVP) Analysis is used to determine how changes in costs, volume, and prices affect a company's profits.

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The contribution margin is the amount left over after deducting variable costs from sales revenue.

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The break-even point is the level of sales where total revenue equals total variable costs.

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In a CVP Analysis, the total contribution margin is calculated by multiplying the contribution margin per unit by the number of units sold.

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A company with a high contribution margin ratio is more profitable than a company with a low contribution margin ratio.

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The margin of safety is the excess of actual or projected sales over the break-even volume of sales.

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CVP Analysis assumes that the sales mix of a company's products remains constant.

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CVP Analysis is useful for determining the sales volume needed to achieve a target profit level.

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In a CVP Analysis, fixed costs are assumed to be constant regardless of the level of production.

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CVP Analysis can only be used in manufacturing companies and is not applicable to service companies.

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