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Cost Accounting: A Managerial Emphasis, 16e, Global Edition (Horngren)
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Chapter 3 Cost-Volume-Profit Analysis mp mpmpmp mp mp
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3.1 Objective 3.1
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1) Managers use cost-volume-profit (CVP) analysis to ________.
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A) forecast the cost of capital for a given period of time
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B) to study the behavior of and relationship among the elements such as total revenues, total costs, and
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C) estimate the risks associated with a given jobmp mp mp mp mp mp mp mp
D) analyse a firm's profitability and help to decide wealth distribution among its stakeholders
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2) One of the first steps to take when using CVP analysis to help make decisions is ________.
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A) calculating the break-even point mp mp mp mp
B) identifying the variable and fixed costs mp mp mp mp mp mp
C) calculation of the degree of operating leverage for the company mp mp mp mp mp mp mp mp mp mp
D) estimating the volume of sales to make a good profit mp mp mp mp mp mp mp mp mp mp
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3) Which of the following is true of cost-volume-
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profit analysis? A) The theory assumes that all costs are variable.
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B) The theory assumes that units manufactured equal units sold.
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C) The theory states that total variable costs remain the same over a relevant range.
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D) The theory states that total costs remain the same over the relevant range.
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Answer: B mpmp mp
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4) The selling price per unit less the variable cost per unit is the ________.
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A) fixed cost per unit mp mp mp mpmp
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5) In the graph method of CVP analysis, ________.
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A) The total revenue line starts at the origin and the total costs line starts at the fixed intercept.
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B) The operating income line starts at the origin and the total costs line starts at the fixed intercept.
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C) The breakeven point is at the fixed intercept where the total revenues line intersects.
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D) The operating income area is the section where the total costs line is above the total revenues line. A
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6) Which of the following is an assumption of CVP analysis?
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A) Total costs can be divided into a fixed component and a component that is variable with respect to th
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e level of output.
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B) When graphed, total costs curve upward.
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C) The unit-selling price is variable as it is subject to demand and supply.
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D) Total costs can be divided into inventoriable and period costs with respect to the level of output. An
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7) Which of the following is true of CVP analysis?
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A) Costs may be separated into separate inventoriable and period components with respect to the level
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B) Total revenues and total costs are linear in relation to output units.
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C) Unit selling price, unit variable costs, and unit fixed costs are known and remain constant.
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D) Proportion of different products will vary according to demand and supply when multiple products
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8) A revenue driver is defined as ________.
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A) any factor that affects costs and revenues
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B) any factor that affects revenues
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C) the only factor that can influence a change in selling price
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D) the only factor that can influence a change in demand
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9) The contribution margin per unit equals
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A) fixed cost - contribution margin ratio
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B) selling price - fixed costs per unit mp mp mp mp mp mp mp
C) selling price - variable costs per unit mp mp mp mp mp mp mp
D) selling price - costs of goods sold mp mp mp mp mp mp mp
Answer: C mpmp mp
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10) Which of the following is true about the assumptions underlying basic CVP analysis?
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A) Selling price varies with demand and supply of the product.
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