Acct ch6 questions

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

Break-even point, loss area, and profit area Correct

The profit graph is based on the following linear equation:

Profit = Unit CM x Q - Fixed Expenses

Which of the following methods do managers use to estimate the fixed and variable components of mixed costs by analyzing past records of cost and activity data?

least-squares regression

When using least-squares regression, R2 represents

the measure of goodness of fit

Break-even point is the level of sales at which

total revenue equals total costs Correct

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

Fixed expenses

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

Unit volume Correct

Excel depicts the least-squares regression results using the equation form

Y = bx + a

A shift in the sales mix from high-margin items to low-margin items can cause total profit to

decrease

The measure of how sensitive net operating income is to a given percentage change in volume sales is called

operating leverage

Contribution margin equals

sales minus variable cost