1. Both total revenues (TR) and total costs (TC) are likely to be affected by changes in the output.

2. Cost-volume-profit (CVP) analysis assumes that the production volume equals sales volume so
that any changes in unit prices can be ignored.
3. The total contribution margin is the unit contribution margin multiplied by the number of units
minus the fixed component of the total costs (TC).
4. Profit is the unit contribution margin multiplied by the number of units minus the fixed component
of the total costs (TC).
5. If the average selling price is $.60 per unit, the average variable cost is $.36 per unit, and the total
fixed costs are $1,500, then sales of 15,000 units will result in operating profits of $3,600.
6. The average selling price is $.60 per unit, the average variable cost is $.36 per unit, and the total
fixed costs are $1,500. If operating profits of $900 are desired, a sales volume of 2,500 units is
necessary.
7. The contribution margin ratio is the contribution margin per unit divided by the selling price per
unit.
8. If the fixed costs are $2,400, targeted operating profits is $1,200, selling price per unit is $2, and
the contribution margin ratio is 40%, then the required sales volume is 9,000 units.
9. The break-even point in sales dollars is fixed costs divided by the contribution margin ratio.
10. An organization's operating leverage is high when it has a low proportion of variable costs in its
total costs.
11. An increase in the selling price per unit will decrease an organization's operating leverage,
assuming sales unit volume doesn't change and there are no other changes in its cost structure.
12. The break-even point for an organization with a low operating leverage will be relatively higher
than the break-even point for an organization with a high operating leverage.
13. An increase in an organization's fixed costs will result in a lower margin of safety, assuming all
other costs and sales remain unchanged.
14. Microsoft Excel® is ideally suited for analyzing alternative CVP scenarios using its "What-If
Analysis" function.
15. Microsoft Excel® cannot be used to find break-even points.
16. An increase in an organization's tax rate will cause an increase in its break-even point.
17. Before-tax operating profits are equal to the after-tax operating profits divided by (1 - tax rate).
18. If an organization's fixed costs are $2,400, tax rate is 40%, and contribution margin is $5,200,
then its after-tax operating profits are $1,680.
19. If the fixed costs are $2,400, targeted before-tax operating profit is $1,200, tax rate is 25%, selling
price per unit is $2, and contribution margin ratio is 40%, then the sales volume is 9,000 units.
20. Cost-volume-profit (CVP) analysis is more complicated for organizations with multiple products
because typically each product has a different contribution margin ratio.
21. The Frances Manufacturing Company sells two products, FRN and CES. FRN has a higher
contribution margin ratio than CES. If the product mix shifts towards CES, the company's
break-even point in total units (i.e., FRN plus CES) will increase.
22. In multi-product cost-volume-profit (CVP) analysis, the fixed product mix method and the
weighted-average contribution margin method yield different break-even points.
23. The more important the decision, the more the manager will want to ensure that the assumptions
made for CVP analysis are applicable.
24. he best course of action in sensitive decisions is that the manager should depend upon the cost
analyst's CVP analysis without considering alternative assumptions.