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Chapter 18 Quiz 4
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1
An income statement that segregates the variable and fixed costs can be termed a contribution margin (or contribution or variable costing) statement.
A)True
B)False
2
The extent to which an organisation uses variable costs in its cost structure is called operating leverage:
A)True
B)False
3
An increase in the sales price will make the break-even point higher and may also discourage people from purchasing the product/service:
A)True
B)False
4
Company A and Company B are competitors in the same industry. Company A has replaced direct labour with investment in highly automated machinery. Company B continues manufacturing its product using large amounts of direct labour. Forecasted sales volumes for both firms are 20% less than for the previous year. Company B will earn less profit than Company A:
A)True
B)False
5
The break-even point is the volume of sales at which the total revenues and costs are equal, and the operation breaks even:
A)True
B)False
6
Goal seek approaches allow the analyst to input changes in assumptions and data in a financial model, and to examine the effect of those changes on the output:
A)True
B)False
7
For CVP analysis to be valid, one of the assumptions is that the behaviour of total revenue is curvilinear, implying that the selling price per unit of the product changes as sales volume varies within the relevant range:
A)True
B)False





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