chapter 4 : CVP

Question 1

At break-even point, total costs equal to total revenue

Answer 1

TRUE

Question 2

Cost, volume and profit analysis assumes that total costs can be separated into
fixed and variable components.

Answer 2

TRUE

Question 3

If the contribution margin ratio is 0.4, it means that 40% of each RM1 of sales
revenue is contributing towards covering fixed costs.

Answer 3

TRUE

Question 4

Contribution margin is the same as gross profit. TRUE/FALSE

Answer 4

FALSE

Question 5

A higher break even points indicates that a business needs to sell more units or
generate higher revenue to cover its fixed costs. TRUE/FALSE

Answer 5

TRUE

Question 6

CVP analysis is useful for decision-making such as pricing strategies and determining
product mix. TRUE/FALSE

Answer 6

TRUE

Question 7

At the break-even point, sales revenues are equal to the total costs.

Answer 7

TRUE

Question 8

A business will enjoy profit if sales units are lower than the break-even sales and suffer losses if sales units are higher than that.

Answer 8

FALSE

Question 9

The contribution margin represents the amount of income or profit the company made before deducting its fixed costs.

Answer 9

TRUE