Chapter 6

Question 1

CVP: Other Business Decisions

Answer 1

• accept or reject a special order
• continue or close down a segment of a business
• make or buy a part of a product

Question 2

Special Order Decisions

Answer 2

CVP analysis can be used when a decision has to be made to accept or reject a special order received by a business.

Question 3

Keep Open or Close Down Decisions

Answer 3

CVP analysis is useful where a decision has to be made to keep open or close down a segment of the business.

Question 4

Make or Buy Decision

Answer 4

A manufactured product is often made up of a series of parts. A manufacturer has to decide if it is cheaper to make each part of a product or to purchase some parts and then install these parts in the finished product.

A similar decision can be made by service businesses. A business college may outsource the calculation of the wages paid to its teachers and save on accounting expenses.