AA025 TOPIC 6 COST VOLUME PROFIT

Break-even point (BEP) is defined as the point where total revenue equals to total costs.

• True

• False

Below are the method for computing a break even point EXCEPT;

• Mathematical equation

• Contribution margin method

• Graphical method

• Net profit method

The purpose of CVP analysis is to estimate how profits are affected by the following factors EXCEPT:

• Selling price

• Sales volume

• Supplier discount

• Total cost

The following is assumptions in Cost Volume Profit (CVP) analysis EXCEPT

• Fixed cost and variable cost can be identified.

• Units of sales equals to unit of production.

• Costs and revenues are linear.

• Selling price per unit always changed

BEP calculation can be calculated using:

• Equation approach

• Evaluation approach

• Comprehensive approach

• Contribution Margin approach

The correct formula of BEP in Ringgit Malaysia by using contribution margin method is:

• Fixed cost divide by contribution margin per unit

• Fixed cost divide by contribution margin ratio

• Fixed cost divide by net profit per unit

• Fixed cost divide by net profit ratio

The cost equation Y=a+bx is often used to express cost formulas. Which of the following representations in this equation is correct?

• The 'b' represents variable cost per unit of activity.

• The 'a' represents variable cost in total.

• The 'x' term represents total costs

• The 'Y' term represents total fixed costs

Which of the following is not involved in CVP analysis?

• unit selling price

• volume or level of activity

• fixed cost per unit

• variable cost per unit

Businesses calculate break-even in units so they know

• how much profit they will earn after they break even

• how many products they must sell to break even

• which costs are variable and which are fixed

• which products they should purchase for resale

Cost volume profit analysis can be used to determine the effects of reduced selling prices, increased fixed costs and reduced variable costs on break-even points.

• True

• False