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