Chapter 3

Question 1

Cost Volume Profit (CVP)

Answer 1

Cost value profit analysis explores the relationship that exists between the revenue, expenses and the profit of a business.

Question 2

Income Statement Format in Management Accounting

Answer 2

In management accounting format, sales less variable expenses, gives the contribution margin, less fixed expenses, gives the profit.

Question 3

Contribution Margin

Answer 3

The contribution margin is the revenue available, after subtracting the variable expenses, to cover the fixed expenses of a business.

The contribution margin is used in many CVP procedures

Question 4

Profit given changes in Revenue and Expenses

Answer 4

The expected profit of a business can be calculated given changes in the revenue and expenses.

Question 5

Calculations in Selling Price of a Product

Answer 5

The selling price of a product can be calculated given the profit made, the fixed and variable expenses and the number of products sold.