Cost Volume Profit Analysis

Question 1

CM is the…

Answer 1

amount available to cover fixed costs and give profit

Question 2

Contribution margin =

Answer 2

sales revenue - all variable costs

Question 3

contribution margin is the..

Answer 3

percent of every sales $ that is available for profit once fixed costs are covered

Question 4

break even occurs when…

Answer 4

profit = 0, which occurs when CM is equal to fixed costs

Question 5

break even can only occur if CM is…

Answer 5

equal to fixed costs

Question 6

operating levergae is…

Answer 6

used to estimate how much profits will change when sales $ change

Question 7

sales mix is…

Answer 7

the % of total sales for each product

Question 8

sales mix is important when…

Answer 8

a company has more than one product

Question 9

a change in sales mix can change…

Answer 9

the total profit

Question 10

different product, but same company, have _______ CMS

Answer 10

different

Question 11

lower sales with ____ CM can reduce total company profits

Answer 11

high

Question 12

higher sales with _____ CM can reduce total company profit

Answer 12

low

Question 13

contribution margin is the amoutn available to…

Answer 13

cover fixed costs

Question 14

once fixed costs are covered, CM goes into…

Answer 14

profit

Question 15

contribution margin per unit is the amount…

Answer 15

operation income increases when one more until is sold or the amount that decreases when one less unit is sold

Question 16

contribution margin ratio is..

Answer 16

the amount (in cents) per sales dollar that is added to operation income when sales dollars increase

Question 17

cost accountants job is to…

Answer 17

project changes and communicate to management

Question 18

break even occurs when…

Answer 18

total contribution margin = total fixed costs

Question 19

what is the operating income at break even?

Answer 19

0

Question 20

operating leverage estimates…

Answer 20

how much OI will change as total sales dollars change

Question 21

a high leverage factor means ____ fixed costs

Answer 21

higher

Question 22

a high leverage indicates…

Answer 22

fast profit growth as sales grow and a higher risk of losing if economic downturn

Question 23

a low leverage means ____ fixed costs

Answer 23

lower

Question 24

a low leverage indicates…

Answer 24

slower profit growth, less of a risk of losing profit

Question 25

the company’s WA CM per until will be lower when…

Answer 25

a company a higher % of lower contribution margin units than planned

Question 26

when a company sells a higher % of lower contribution margin units than planned, the WA CM per unit will be…

Answer 26

lower

Question 27

that situation would require…

Answer 27

more total units to be sold to achieve planned operating profits