CVP Analysis Flashcards
1
Q
CVP Analysis assumption
A
- Total cost behaves as a strictly linear semi-variable cost:
a) fixed cost remains fixed
b) total variable costs change
proportionally with volume - Unit selling prices do not change with volume
- Costs and income are matched
- Levels of efficiency and productivity do not change
- There is only a single product.
2
Q
2 ways to identify break-even point
A
- Total revenue = Total cost
- Contribution = Fixed cost
3
Q
The higher the margin of safety (MOS)……..
A
the lower the risk of making a loss