Which of the following is an assumption of CVP analysis?
Total costs can be divided into a fixed component and a component that is variable with respect to the level of output.
When graphed, total costs curve upward.
The unit-‐‑selling price is variable as it is subject to demand and supply.
Total costs can be divided into inventoriable and period costs with respect to the level of output
Cost-volume-profit analysis is used primarily by management
forecast the cost of capital for a given period of time
to study the behavior of and relationship among the elements such as total revenues, total costs, and income
estimate the risks associated with a given job
analyse a firm'ʹs profitability and help to decide wealth distribution among its stakeholders
Which of the following is the mathematical expression of contribution margin ratio?
Contribution margin ratio = Contribution margin percentage × Revenues (in dollars)
Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars)
Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars)
Contribution margin ratio = Contribution margin percentage × Operating leverage
The contribution margin percentage increases when ________.
total fixed costs increase
total fixed costs decrease
variable costs per unit increase
variable costs per unit decrease
In a company with low operating leverage, ________.
fixed costs are more than the contribution margin
contribution margin and operating income are inversely related
there is a higher possibility of net loss than a higher-‐‑leveraged firm
less risk is assumed than in a highly leveraged firm
If a company would like to increase its degree of operating leverage it should ________.
increase its sales relative to its fixed costs
increase its sales relative to its variable costs
increase its variable costs relative to its fixed costs
increase its fixed costs relative to its variable costs
