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chapter 18
Cost-Volume-Profit
and Business Scalability
goals discussion
goals
achievement
fill
in the blanks
multiple
choice
problems
check list and key terms
Select the appropriate response.
A cost which varies in direct proportion to a change in an activity base, but is fixed per unit, is known as a:
Fixed costs are assumed to be constant:
at any level of production or over the relevant range
Costs like supervisory salary, office space, and so forth, which increase in chunks are called:
A statistical technique that relies on mathematical formulas to separate a cost between its fixed and variable components is called:
the method of least squares or scattergraph
The method of separating costs between fixed and variable components which relies on only two data points for analysis is called the:
high-low method or mixed-cost method
The high-low method and scattergraph method will achieve the same results.
The break-even point in units can be determined by dividing fixed costs by the:
unit contribution margin or contribution margin ratio
On a break-even graph with dollars on the vertical axis and sales volume on the horizontal axis, fixed costs would appear as a straight line parallel to the:
vertical axis or horizontal axis
The contribution margin equals the selling price per unit minus the fixed cost per unit.
The contribution margin can be defined as the amount that an additional unit of sales contributes towards covering fixed costs and generating income.
In computing the sales volume necessary to achieve a target income, target income is treated the same as a:
In considering the impact of operating changes on CVP analysis, any change to any component in the CVP model will require a complete revision of all elements included in the original CVP analysis.
For a multi-product firm, the break-even point computation begins with a computation of the:
weighted contribution margin or weighted fixed costs
With a multi-product firm the break-even units refer to the sum of:
the unit sales for each product or a combination of the individual products in the same proportion as the predicted sales mix
A limiting assumption of cost-volume-profit analysis is that costs can be classified as fixed or variable.
Correct cost-volume-profit analysis depends on the assumption that inventory levels: