Chapter 6 Cost-Volume-Profit Relationships DOC

Title	Chapter 6 Cost-Volume-Profit Relationships
Author	Abel Meseret
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File Type	DOC
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Summary

Chapter 6 Cost-Volume-Profit Relationships True/False 1. To estimate what the profit will be at various levels of activity, a manager can simply take the number of units to be sold over the breakeven point and multiply that number by the unit contribution margin. Level: Medium LO: 1 Ans: T...

Description

Chapter 6 Cost-Volume-Profit Relationships True/False 1. To estimate what the proft will be at various levels of activity, a manager can simply take the number of units to be sold over the break-even point and multiply that number by the unit contribution margin. Level: Medium LO: 1 Ans: T 2. Incremental analysis is generally the simplest and most direct approach to decision making. Level: Easy LO: 1 Ans: T 3. To facilitate decision-making, fied eipenses should be eipressed on a per-unit basis. Level: Medium LO: 1 Ans: F 4. One assumption in CVP analysis is that inventories do not change. Level: Easy LO: 1 Ans: T 5. On a CVP graph for a proftable company, the total eipense line will be steeper than the total revenue line. Level: Medium LO: 2 Ans: F 6. If sales volume increases, and all other factors remain unchanged, the contribution margin ratio will decrease. Level: Medium LO: 3 Ans: F 7. The break-even point for a capital intensive, automated company will tend to be higher than for a less capital intensive company while the margin of safety will tend to be lower. Level: Medium LO: 5,7 Ans: T 8. An increase in the number of units sold will decrease a company's break-even point. Level: Medium LO: 5 Ans: F 9. Assuming that the unit contribution margin is positive, a 10% decrease in selling price will increase the break-even point in terms of unit sales more than will a 10% increase in the variable eipense. Level: Hard LO: 5 Ans: T Brewer, Introduction to Managerial Accounting, 3/e 279...