ACC Ch.6 Smartbook
CVP analysis is only used for break-even and target profit analysis.
False
Cost structure refers to how a company uses product and period costs in an organization.
False
Solving for the sales level needed to achieve a profit of zero is ______ analysis.
break-even
Which of the following is NOT a method used for basic CVP analysis?
break-even analysis
Degree of operating leverage equals ______.
contribution margin / net operating income
The weighted-average ________ ________ _______ is based on the relative percentage of total sales revenue in dollars, not units.
contribution margin ratio
When multiple products are sold, the break-even point depends on the _______ mix
sales
The equation for the profit equation method is ______.
total sales revenue - total variable costs - total fixed costs = profit
Methods that can be used to model the relationship between revenues, costs, profit and volume include the____ contribution margin method and the contribution ______ __________ method.
unit margin ratio
The weighted average unit contribution margin is the average unit contribution margin of multiple products weighted according to ______.
units sold
The term cost structure refers to how a company uses _______ costs versus _______ costs in its operations
variable fixed
The excess of the budgeted (or actual) sales dollars over break-even sales is called the ______ of ________.
margin of safety
CVP ______.
- can be used for "what-if" analysis -can be used o make many different decisions -allows managers to see how changing one variable can impact another
A company sells two products. Product A sales total $28,000 and Product B sales total $12,000. Total contribution margin is $18,000 for Product A and $9,000 for Product B. The weighted average contribution margin ratio is
67.5 % = total contribution margin / total sales revenue =(18000 + 9000) / ( 28000 + 12000) = 27000/ 40000 =0.675 x 100 = 67.5 %
The goal of break-even analysis is to find the level of sales where profit is equal to ______.
Zero
An increase in sales will increase net operating income by a multiple of that increase in sales. The multiple is known as the ______.
degree of operating leverage
When constructing a CVP graph, the vertical axis represents ______.
dollars
When constructing a CVP graph, the place where the total ______ cost line intercepts the y-axis represents total costs.
fixed
The weighted average unit contribution margin ______.
- is used instead of the single product contribution margin in multi-product break-even analysis -assumes that the percentage of each product sold is constant -is based on the relative percentage of each unit sold
CVP analysis can be useful in deciding ______.
- what cost structure to implement -what price to charge for goods or services -which products to offer -which services to offer -what marketing strategy to use
Which of the following are assumptions of cost volume profit analysis?
-all cost can be classified as either fixed or variable -in multi-product companies, the sales mix is constant -production volume is equal to sales volume
The break-even point can be affected by ______.
-sales mix -total fixed cost -product mix
In the profit equation, total ______ is a function of the number of units sold (Q).
-sales revenue -variable cost
Contribution margin equals sales minus ______.
-variable selling and administrative cost -variable manufacturing cost
The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.
False it is the excess of the udgeted (or actual) sales dollars over break-even sales dollars
How much contribution margin is generated per dollar of sales revenue is the ______ ________ ________ .
contribution margin ratio
The contribution margin stated as a percentage of sales dollars is the ______.
contribution margin ratio
Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs?
cost-volume-profit (CVP) analysis
Decisions about whether to use fixed or variable costs to run a business affects a company's ______ leverage.
operating
Decisions about whether to use fixed or variable costs to run a business impact a company's ______.
operating leverage
According to the assumptions of CVP, ______ will not change as the volume of a product increases or decreases.
price
When preparing a multi-product break-even analysis, the assumption is ordinarily made that the ______ will not change.
sales mix