Cost Accounting Chapter 9

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Chapter 9—Break-Even Point and Cost-Volume-Profit Analysis

MULTIPLE CHOICE

1. CVP analysis requires costs to be categorized as a. | either fixed or variable. | b. | direct or indirect. | c. | product or period. | d. | standard or actual. |

ANS: A PTS: 1 DIF: Easy OBJ: 9-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

2. With respect to fixed costs, CVP analysis assumes total fixed costs a. | per unit remain constant as volume changes. | b. | remain constant from one period to the next. | c. | vary directly with volume. | d. | remain constant across changes in volume. |

ANS: D PTS: 1 DIF: Easy OBJ: 9-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

3. CVP analysis relies on the assumptions that costs are either strictly fixed or strictly variable. Consistent with these assumptions, as volume decreases total a. | fixed costs decrease. | b. | variable costs remain constant. | c. | costs decrease. | d. | costs remain constant. |

ANS: C PTS: 1 DIF: Easy OBJ: 9-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

4. CVP analysis is based on concepts from a. | standard costing. | b. | variable costing. | c. | job order costing. | d. | process costing. |

ANS: B PTS: 1 DIF: Easy OBJ: 9-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

5. Cost-volume-profit analysis is a technique available to management to understand better the interrelationships of several factors that affect a firm's profit. As with many such techniques, the accountant oversimplifies the real world by making assumptions. Which of the following is not a major assumption underlying CVP analysis? a. | All