Understanding Cost Volume Profit Analysis

• 200 units

• 300 units

• 400 units

• 500 units

Which of the following best describes the contribution margin?

• The difference between total sales and total fixed costs

• The difference between total sales and total variable costs

• The difference between total variable costs and total fixed costs

• The difference between total sales and total costs

If a company has fixed costs of $15,000 and a contribution margin ratio of 40%, what is the break-even sales revenue?

• $25,000

• $30,000

• $37,500

• $40,000

Which of the following is an example of a variable cost?

• Rent for the factory

• Salaries of permanent staff

• Raw materials used in production

• Insurance premiums

How does an increase in sales volume affect the break-even point, assuming all other factors remain constant?

• The break-even point increases

• The break-even point decreases

• The break-even point remains unchanged

• The effect cannot be determined

What is the formula for calculating the contribution margin per unit?

• Selling price per unit - Fixed cost per unit

• Selling price per unit - Variable cost per unit

• Total sales - Total fixed costs

• Total sales - Total variable costs

Which of the following is a profitability ratio?

• Current ratio

• Debt-to-equity ratio

• Gross profit margin

• Inventory turnover ratio

• 250 units

• 300 units

• 400 units

• 500 units

Which of the following statements about cost behaviour patterns is true?

• Fixed costs change with the level of production

• Variable costs remain constant per unit regardless of production level

• Mixed costs are entirely variable

• Step costs decrease as production increases

What is the impact on profitability if the contribution margin per unit increases while fixed costs remain constant?

• Profitability decreases

• Profitability remains unchanged

• Profitability increases

• Profitability cannot be determined