Question 25 An assumption under CVP analysis is that: Fixed costs will remain fi
ID: 2600445 • Letter: Q
Question
Question 25
An assumption under CVP analysis is that:
Fixed costs will remain fixed in the long run
All relevant costs can be broken down into their fixed and variable components
Variable costs will change in inverse fashion with sales revenue
Total costs will not increase as sales revenue increases
10 points
Question 26
On a breakeven graph, the breakeven point is the point where the:
Sales revenue and total cost lines intersect
Sales revenue and fixed cost lines intersect
Sales revenue and variable cost lines intersect
Total cost line intersects the vertical axis
10 points
Question 27
In using the CVP equation, the sales level required in units to breakeven is determined by dividing:
Fixed costs by contribution margin in dollars
Fixed costs plus operating income by 100% minus the variable cost percentage
Fixed costs plus net income by the contribution margin percent
The sales level in dollars by unit variable cost
10 points
Question 28
An advantage of budgeting is that:
Those involved in budgeting are obliged to look ahead and be flexible
The unpredictable future is an excuse for not having fairly accurate estimates
If budgeted expenses are overestimated, there will be extra money at the end of the period for staff bonuses
Staff involved in budgeting will learn about confidential management matters
Fixed costs will remain fixed in the long run
All relevant costs can be broken down into their fixed and variable components
Variable costs will change in inverse fashion with sales revenue
Total costs will not increase as sales revenue increases
Explanation / Answer
25.
Answer = All relevant cost can be broken down into their Variable and Fixed components
In CVP analysis, all cost can be classified into Variable and Fixed Cost.
CVP analysis is for Short term as no one can say for sure that this cost will remain same in long run.
Total cost will increase with increase in Revenue as Variable cost has direct relation with sales, i.e. Variable cost will increase with increase in sales or production and Vice-versa.
26.
Answer = Sales revenue and total cost lines intersect
Breakeven point means the point where the Profit is Zero that means where Sales is equal to Total cost
27.
Answer = Fixed costs by contribution margin in dollars
BEP = Fixed Cost / Contribution per unit
28.
Answer = Those involved in budgeting are obliged to look ahead and be flexible
Budgeting helps the company to look forward as they know how much sales or production or cash..etc they are supposed to get and will complete the goal accordingly and helps them to be flexible.
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