Chapter 4: CVP Concepts

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1. The cost-volume-profit graph plots the total revenue line

and the total cost line.

2. A profit-volume graph visually portrays the profits and units sold

relationship between

3. The cost-volume profit graph depicts the re- true

lationships among cost, volume, and profits,
by plotting the total revenue line and the total
cost line on the graph.

4. The profit-volume graph shows the relation- true

ship between operating income and the num-
ber of units sold.

5. The margin of safety measures the units sold true

or the revenue earned above the break-even
volume.

6. If the break-even point increases, the margin false

of safety increases.

7. Degree of operating leverage is calculated as Contribution margin / Oper-

ating income

8. Operating leverage is the use of fixed costs to

extract higher percentage
changes in profits as sales
activity changes.

9. Which of the following can be considered a margin of safety

measure of risk in cost-volume-profit analy-
sis?

10. If actual sales equal break-even sales the margin of safety equals
zero.

11. The breakeven point is the activity level revenues equal the sum of
where: variable and fixed costs

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 Chapter 4: CVP Concepts
Study online at https://quizlet.com/_2mgeub
12. At the break-even point, total contribution margin
equals total fixed cost.

13. Which of the following will increase a compa- increasing variable cost per
ny's breakeven point? unit

14. If variable costs per unit increase, then the false

breakeven point will decrease.

15. If fixed costs increase, the break-even point false

decreases.

16. If variable costs per unit decrease, sales vol- decrease

ume at the break-even point will

17. If the selling price per unit increases, the decrease

break-even point in units will

18. The contribution income statement high- variable and fixed cost
lights:

19. Which is the equation for operating income? (Price × Units sold) (Unit
variable cost × Units sold)
Fixed cost

20. If variable expenses decrease and the price true

increases, the break-even point decreases.

21. The contribution margin income statement true

provides a good check to determine if the sale
of a certain number of units really results in
operating income of the given amount.

22. Most firms would like to earn operating in- false

come equal to the break-even point.

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