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    The document discusses key concepts in contribution margin analysis and break-even point calculation. It states that if the contribution margin is positive, either a profit or loss is possible depending on whether fixed expenses are covered. At the break-even point, fixed costs plus variable costs equal sales. To measure profit or loss at different sales levels, use a vertical line between the total revenue line and total expense line on a CVP graph. The impact on operating income of a change in sales can be computed by applying the contribution margin ratio to the dollar change in sales.

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    The document discusses key concepts in contribution margin analysis and break-even point calculation. It states that if the contribution margin is positive, either a profit or loss is possible depending on whether fixed expenses are covered. At the break-even point, fixed costs plus variable costs equal sales. To measure profit or loss at different sales levels, use a vertical line between the total revenue line and total expense line on a CVP graph. The impact on operating income of a change in sales can be computed by applying the contribution margin ratio to the dollar change in sales.

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    7 views1 page

    6 PDF

    Uploaded by

    El - lool
    The document discusses key concepts in contribution margin analysis and break-even point calculation. It states that if the contribution margin is positive, either a profit or loss is possible depending on whether fixed expenses are covered. At the break-even point, fixed costs plus variable costs equal sales. To measure profit or loss at different sales levels, use a vertical line between the total revenue line and total expense line on a CVP graph. The impact on operating income of a change in sales can be computed by applying the contribution margin ratio to the dollar change in sales.

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    of 1

    25. if contribution margin is positive?

    a.Profit will occur


    b. Both a profit and loss are possible
    c. Profit will ocean the fixed expenses are greater than the contribution margin.
    d.A loss will occur if the contribution margin is greater than fixed cost
    Ans: b
    26. At the breakeven point:
    a. Profit is $0
    b. Fixed Cost + variable cost = sales
    c. Fixed Cost = CM
    d. All of the above
    Ans: d
    27. A complete CVP graph will show that profit or loss at any level of sales is
    measured by
    a. A vertical line between the fixed cost line and the x axis
    b. A horizontal line between the revenue line and the Y-axis
    c. A vertical line between the total revenue line and the total expense line
    d. A horizontal line between total revenue line and the total expense line .

    28. The impact on operating income of any given dollar change in total sales can be computed by
    applying which ratio to the dollar change?
    a. Profit margin
    b. variable cost ratio
    c. contribution margin
    d. ratio of variable to fixed expense
    Ans: c

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