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WorksheetsPRICOS Online Quiz #1
Total questions: 20
Worksheet time: 20mins
Cost-Volume-Profit (CVP) Analysis is used to determine how changes in costs, volume, and prices affect a company's profits.
TRUE
FALSE
The contribution margin is the amount left over after deducting variable costs from sales revenue.
TRUE
FALSE
The break-even point is the level of sales where total revenue equals total variable costs.
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FALSE
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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FALSE
A company with a high contribution margin ratio is more profitable than a company with a low contribution margin ratio.
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FALSE
The margin of safety is the excess of actual or projected sales over the break-even volume of sales.
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FALSE
CVP Analysis assumes that the sales mix of a company's products remains constant.
TRUE
FALSE
CVP Analysis is useful for determining the sales volume needed to achieve a target profit level.
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FALSE
In a CVP Analysis, fixed costs are assumed to be constant regardless of the level of production.
TRUE
FALSE
CVP Analysis can only be used in manufacturing companies and is not applicable to service companies.
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FALSE
What is the primary objective of cost-volume-profit (CVP) analysis?
To determine the profitability of a company
To determine the breakeven point for a company
To determine the optimal product mix for a company
To determine the market demand for a company
What is the formula for calculating the contribution margin?
Sales revenue - variable costs
Sales revenue / variable costs
Variable costs - sales revenue
Fixed costs / sales revenue
Which of the following is a variable cost?
Rent
Salaries of top executives
Raw materials
Property taxes
Which of the following is NOT a component of the CVP analysis?
Sales volume
Variable costs
Fixed costs
Operating income
The contribution margin ratio is calculated as:
Total contribution margin / total sales revenue
Total sales revenue / total contribution margin
Total variable costs / total sales revenue
Total fixed costs / total sales revenue
The margin of safety is calculated as:
Actual sales - breakeven sales
Breakeven sales - actual sales
Sales revenue - variable costs
Sales revenue / contribution margin
Which of the following is NOT an assumption of CVP analysis?
Total fixed costs remain constant
Sales mix remains constant
Selling price remains constant
Variable costs remain constant
The contribution margin per unit is calculated as:
Sales price per unit - fixed costs per unit
Sales price per unit - variable costs per unit
Total sales revenue / total units sold
Total variable costs / total units sold
By identifying which costs are fixed and which are variable, businesses can determine which expenses can be reduced in the short term to improve profitability. This is referred to as...
Pricing
Decisions
Production
Decisions
Resource
Allocation
Financial
Planning
A company has a contribution margin ratio of 40%. What is the breakeven point in dollars if fixed costs are $100,000?
$40,000
$150,000
$250,000
$400,000
