WorksheetsCost Volume Profit Analysis- Part 2
Total questions: 14
Worksheet time: 8mins
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
CVP analysis does not assume that
selling prices remain constant
there is a single revenue and cost driver
total fixed costs vary inversely with the output level
total costs are linear within the relevant range
Contribution margin:
is sales less cost of goods sold
is revenue remaining after deducting variable costs
may be expressed as unit contribution margin
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
Identify approaches to compute break even point.
Mathematical equation
Margin of safety
Contribution margin technique
Graphic presentation
HIgh low method
What is the margin of safety?
the margin between projected units and break even point units
the margin between profit and loss
the margin between units and sales
the margin between each break even point
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
In CVP analysis, the term “cost” includes manufacturing costs, and selling and administrative expenses.
True
False
The margin of safety can be expressed in units of product, in RM, or as a percentage of sales.
units of product
Graphic presentation
as percentage of sales
mathematical equation
Ringgit Malaysia (RM)
Cost Volume Profit Analysis is most important for the company to determine the ___________________
volume of operations necessary to break-even
relationship between revenue and costs at various level of operation
variable revenue necessary to equal fixed costs
sales revenue necessary to equal variable costs
Why is ethical behavior important in CVP analysis?
It ensures maximum profit at any cost
It helps maintain transparency and trust in financial reporting
It allows manipulation of data for better-looking financial statements
It has no impact on decision-making
Which of the following is NOT an ethical issue in CVP analysis?
Understating variable costs to appear more profitable
Properly classifying fixed and variable costs
Overestimating sales volume to secure funding
Misrepresenting contribution margin to influence decisions
If a financial analyst ignores ethical guidelines in CVP analysis, what could be the consequences?
Legal penalties and loss of reputation
Higher profit margins
Increased cost efficiency
More investment opportunities
A company adjusts CVP analysis to justify layoffs, even though true data suggests it's unnecessary. This is an example of:
Ethical decision-making
Manipulative financial reporting
Cost reduction strategy
Business efficiency
