Cost Accounting
CHAPTER 3
COST-VOLUME-PROFIT ANALYSIS
TRUE/FALSE
1. To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components.
Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis
2. Cost-volume-profit analysis may be used for multi-product analysis when the proportion of different products remains constant.
Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis, sales mix
3. It is assumed in CVP analysis that the unit selling price, unit variable costs, and unit fixed costs are known and constant.
Answer: False Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis It is assumed in CVP analysis that the unit selling price, unit variable costs, and total fixed costs are known and constant.
4. In CVP analysis, the number of output units is the only revenue driver.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis, revenue driver
5. Many companies find even the simplest CVP analysis helps with strategic and long-range planning.
Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis
6. In CVP analysis, total costs can be separated into a fixed component that does not vary with output and a component that is variable with output level.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis
7. In CVP analysis, variable costs include direct variable costs, but do not include indirect variable costs.
Answer: False Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis In CVP analysis variable costs include direct variable costs and indirect variable costs.
8. In CVP analysis, an assumption is made that the total revenues are linear with respect to output units, but
COST-VOLUME-PROFIT ANALYSIS
TRUE/FALSE
1. To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components.
Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis
2. Cost-volume-profit analysis may be used for multi-product analysis when the proportion of different products remains constant.
Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis, sales mix
3. It is assumed in CVP analysis that the unit selling price, unit variable costs, and unit fixed costs are known and constant.
Answer: False Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis It is assumed in CVP analysis that the unit selling price, unit variable costs, and total fixed costs are known and constant.
4. In CVP analysis, the number of output units is the only revenue driver.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis, revenue driver
5. Many companies find even the simplest CVP analysis helps with strategic and long-range planning.
Answer: True Difficulty: 1 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis
6. In CVP analysis, total costs can be separated into a fixed component that does not vary with output and a component that is variable with output level.
Answer: True Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis
7. In CVP analysis, variable costs include direct variable costs, but do not include indirect variable costs.
Answer: False Difficulty: 2 Objective: 1 Terms to Learn: cost-volume-profit (CVP) analysis In CVP analysis variable costs include direct variable costs and indirect variable costs.
8. In CVP analysis, an assumption is made that the total revenues are linear with respect to output units, but