managerial accounting exam 2

Break-even point is the level of sales at which ______.

total revenue equals total costs

What is usually plotted as a horizontal line on the CVP graph?

fixed expenses

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for ________.

fixed overhead costs

When the units produced are less than the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

greater than

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold

unit contribution margin

Which of the following costing approaches is best suited for cost-volume-profit analysis?

variable

Absorption costing income statements ignore ________.

variable and fixed cost distinctions

operating leverage

measure of how sensitive NOI is to % change in unit sales - the great % of fixed costs, the greater the operating leverage

advantages of variable costing method

- use of contribution method (variable and fixed costs) (easier to use for CVP analysis) - clearly explain that when sales go up, NOI goes up and vice versa) - the total of fixed costs is states separately

With regards to interpretation, what are the important areas that appear on a CVP graph?

Break-even point, loss area, and profit area

The profit graph is based on the following linear equation:

Profit = Unit CM × Q - Fixed Expenses.

When the units produced are equal to the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

equal to

segmented income statements can be used for

decision making and to evaluate managerial performance

When the units produced exceed the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

less than

When the number of units produced is greater than the number of units sold, variable costing net operating income will be ________.

less than absorption costing net operating income

What is represented on the X axis of a cost-volume-profit (CVP) graph?

unit volume