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.
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2
Q

2 ways to identify break-even point

A
  • Total revenue = Total cost
  • Contribution = Fixed cost
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3
Q

The higher the margin of safety (MOS)……..

A

the lower the risk of making a loss

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