Cost, Volume, and Profit Questions

CVP Questions 1

7 ) Mixed costs in a CVP Analysis should be clearly separated into its Fixed and Variable components . The Relevant Range approach is most commonly used in determining whether costs are fixed or variable . This approach takes into consideration the length of the time horizon and the specific decision situation when classifying costs as variable or fixed . Within the relevant range both fixed costs and variable cost per unit remain constant

9 ) I do not agree that CVP analysis is based entirely on Unit costs because the first assumption

in a CVP analysis according to Horngren Datar and Foster (2006 ) is that the number of output units is the only revenue driver and cost driver ' which enables me to conclude that the unit costs is not the entire basis in a CVP analysis

14 (A ) the breakeven point is plotted by constructing a graph which indicates the Costs and Dollars earned on the Vertical axis and the Units sold on the Horizontal axis . You will then plot the line wherein the fixed cost which remains constant in the relevant range will be starting point and is increased by the variable costs the other line is the revenue line which starts at point 0 and is increased by the amount of sales . Determine where the two lines meet and that will be its breakeven point (B ) When you have determined your break-even point from the graph , you will determine the level of activity by drawing a straight...