Chapter 7 ACCT 222

All else being equal, a decrease in a company's fixed expenses will:

Decrease the sales needed to break even

A company with a low operating leverage

Has relatively more variable costs than fixed costs

All else being equal, if a company's variable expenses increase:

Its contribution margin ratio will decrease

Which of the following is true regarding a company that offers more than one product?

The breakeven point is dependent on sales mix assumptions

The contribution margin ratio is

Contribution margin divided by sales revenue

For a given level of sales, a company's operating leverage is defined as:

Contribution margin/ Operating income

The formula to find the break even point or a target profit volume in terms of number of units need to be sold is

Fixed expenses+Operating income/contribution margin per unit

The contribution margin is

Sales revenue minus variable expenses

Which of the following is false regarding choosing between two cost structures?

The indifference point is the point where total revenues equals total expenses.

On a CVP graph, the breakeven point is:

The intersection of the total revenue line and the total expense line