ACG 2071 EXAM 3 PRACTICE SOLUTION STUDY SHEET QUESTIONS AND DETAILED ANSWERS

ACG 2071 EXAM 3 PRACTICE SOLUTION
STUDY SHEET QUESTIONS AND DETAILED
ANSWERS

●● if the unit selling price increases, what happens to the break even
point?
Answer: it decreases


●● if the fixed cost increases, what happens to the break even point?
Answer: it increases


●● unit contribution margin
Answer: sales price per unit - variable cost per unit


●● operating income
Answer: contribution margin - fixed costs


●● contribution margin ratio
Answer: contribution margin/sales


●● variable cost per unit
Answer: total variable costs/total units

, ●● fixed cost per unit
Answer: total fixed costs/total units


●● as the amount of units produced increases, what happens to the fixed
cost per unit?
Answer: it decreases (but total fixed cost stays the same)


●● operating leverage
Answer: contribution margin/operating income


●● margin of safety (%)
Answer: (sales - sales at break even) / sales


●● three primary assumptions of cost-volume-profit analysis:
Answer: 1. total sales & total costs can be represented by a straight line
2. there is no change in inventory during the period
3. cost can be divided into fixed and variable components


●● type of chart that plots only profit line rather than sales and costs
lines:
Answer: profit-volume chart