Chapter 3 - Cost - Volume - Profit Analysis

Question 1

What is cost- volume- profit analysis?

Answer 1

A tool managerial accountants use to study the behavior of and relationship among these elements as changes occur in the number of units sold, the selling price, the variable cost per unit, or the fixed costs of a product.

Question 2

What is contribution margin?

Answer 2

The difference between total revenues and total variable costs.

Question 3

What information is obtained by looking at contribution margin?

Answer 3

indicates why operating income changes as the number of units sold changes.

Question 4

How do you calculate contribution margin per unit?

Answer 4

Selling price per unit - Variable cost per unit

Question 5

How do you calculate contribution margin as a percentage?

Answer 5

Contribution margin / Revenues

Question 6

How do you calculate operating income?

Answer 6

Contribution Margin - Fixed Costs`

Question 7

What is the utility of contribution margin as a percentage?

Answer 7

useful tool for calculating how a change in revenues changes contribution margin.