What is Cost Volume Profit (CVP) analysis?
a) An analysis technique used to study the relationship between costs, volume, and profit.
b) A method to calculate profit margins for different products.
c) A technique to analyze market share and competitive advantage.
d) A method to determine the optimal pricing strategy for a product.
Answer: a) An analysis technique used to study the relationship between costs, volume, and profit.
Which of the following statements is true about fixed costs in CVP analysis?
a) Fixed costs remain constant on a per-unit basis.
b) Fixed costs vary in direct proportion to changes in volume.
c) Fixed costs decrease as volume increases.
d) Fixed costs are not considered in CVP analysis.
Answer: a) Fixed costs remain constant on a per-unit basis.
What is the breakeven point in CVP analysis?
a) The point at which total revenue equals total cost.
b) The point at which total revenue exceeds total cost.
c) The point at which total revenue is zero.
d) The point at which variable costs equal fixed costs.
Answer: a) The point at which total revenue equals total cost.
Which of the following factors can affect the contribution margin in CVP analysis?
a) Changes in fixed costs.
b) Changes in variable costs.
c) Changes in selling price.
d) All of the above.
Answer: d) All of the above.
What is the formula to calculate the contribution margin ratio?
a) Contribution Margin Ratio = Total Revenue / Total Cost.
b) Contribution Margin Ratio = (Total Revenue – Variable Costs) / Total Revenue.
c) Contribution Margin Ratio = (Total Revenue – Fixed Costs) / Total Revenue.
d) Contribution Margin Ratio = Variable Costs / Total Revenue.
Answer: b) Contribution Margin Ratio = (Total Revenue – Variable Costs) / Total Revenue.
Which of the following is a limitation of CVP analysis?
a) Assumes fixed costs remain constant over different levels of activity.
b) Ignores the impact of competition and market conditions.
c) Assumes a linear relationship between costs and volume.
d) All of the above.
Answer: d) All of the above.
How does an increase in the selling price affect the breakeven point in CVP analysis?
a) Increases the breakeven point.
b) Decreases the breakeven point.
c) Does not affect the breakeven point.
d) The impact depends on changes in variable costs.
Answer: b) Decreases the breakeven point.
Which of the following statements is true about the margin of safety in CVP analysis?
a) It represents the excess of actual sales over the breakeven point.
b) It represents the excess of breakeven sales over actual sales.
c) It is calculated by subtracting fixed costs from total revenue.
d) It is not relevant in CVP analysis.
Answer: a) It represents the excess of actual sales over the breakeven point.
What is the formula to calculate the target profit in CVP analysis?
a) Target Profit = (Fixed Costs + Variable Costs) / Selling Price per unit.
b) Target Profit = Fixed Costs / Contribution Margin Ratio.
c) Target Profit = Breakeven Point / Selling Price per unit.
d) Target Profit = Total Revenue – Total Costs.
Answer: b) Target Profit = Fixed Costs / Contribution Margin Ratio.
How does an increase in variable costs affect the contribution margin ratio in CVP analysis?
a) Increases the contribution margin ratio.
b) Decreases the contribution margin ratio.
c) Does not affect the contribution margin ratio.
d) The impact depends on changes in fixed costs.
Answer: b) Decre
Which of the following statements is true regarding the profit-volume (P/V) ratio in CVP analysis?
a) The P/V ratio represents the percentage of sales revenue that contributes to profit.
b) The P/V ratio remains constant regardless of changes in volume.
c) The P/V ratio is calculated by dividing fixed costs by contribution margin.
d) The P/V ratio is not relevant in CVP analysis.
Answer: a) The P/V ratio represents the percentage of sales revenue that contributes to profit.
How does an increase in fixed costs affect the breakeven point in CVP analysis?
a) Increases the breakeven point.
b) Decreases the breakeven point.
c) Does not affect the breakeven point.
d) The impact depends on changes in variable costs.
Answer: a) Increases the breakeven point.
What is the formula to calculate the target sales volume in CVP analysis?
a) Target Sales Volume = Fixed Costs / Contribution Margin per unit.
b) Target Sales Volume = Breakeven Point / Selling Price per unit.
c) Target Sales Volume = Total Revenue – Total Costs.
d) Target Sales Volume = Variable Costs / Contribution Margin per unit.
Answer: a) Target Sales Volume = Fixed Costs / Contribution Margin per unit.
Which of the following statements is true about the margin of safety ratio in CVP analysis?
a) It represents the percentage of sales revenue that exceeds the breakeven point.
b) It is calculated by dividing the margin of safety by the breakeven point.
c) A higher margin of safety ratio indicates a lower risk of losses.
d) The margin of safety ratio is not used in CVP analysis.
Answer: c) A higher margin of safety ratio indicates a lower risk of losses.
How does a decrease in variable costs affect the contribution margin in CVP analysis?
a) Increases the contribution margin.
b) Decreases the contribution margin.
c) Does not affect the contribution margin.
d) The impact depends on changes in fixed costs.
Answer: a) Increases the contribution margin.
Which of the following statements is true about the sales mix in CVP analysis?
a) Sales mix refers to the proportion of fixed costs in total costs.
b) A change in the sales mix does not affect the breakeven point.
c) The sales mix affects the contribution margin and overall profitability.
d) Sales mix analysis is not relevant in CVP analysis.
Answer: c) The sales mix affects the contribution margin and overall profitability.
What is the formula to calculate the margin of safety in CVP analysis?
a) Margin of Safety = Total Revenue – Total Costs.
b) Margin of Safety = Total Revenue / Total Costs.
c) Margin of Safety = Actual Sales – Breakeven Sales.
d) Margin of Safety = Fixed Costs / Contribution Margin per unit.
Answer: c) Margin of Safety = Actual Sales – Breakeven Sales.
Which of the following statements is true about the assumptions of CVP analysis?
a) CVP analysis assumes that all costs are variable.
b) CVP analysis assumes that the selling price remains constant.
c) CVP analysis assumes that the production capacity is unlimited.
d) CVP analysis assumes that there are no indirect costs.
Answer: b) CVP analysis assumes that the selling price remains constant.
How does an increase in the contribution margin affect the breakeven point in CVP analysis?
a) Increases the breakeven point.
b) Decreases the breakeven point.
c) Does not affect the breakeven point.
d) The impact depends on changes in fixed costs.
Answer: b) Decreases the breakeven point.