Asked by China lilian on Apr 27, 2024
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Which of the following statements is correct with regard to a Cost-Volume-Profit graph?
A) A Cost-Volume-Profit graph shows the maximum possible profit.
B) A Cost-Volume-Profit graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.
C) A Cost-Volume-Profit graph assumes that total expense varies in direct proportion to unit sales.
D) A Cost-Volume-Profit graph shows the operating leverage as the gap between total sales revenue and total expense at the actual level of sales.
Cost-Volume-Profit Graph
A visual representation showing the relationship between a company's costs, sales volume, and profits at various levels of activity.
Break-Even Point
The level of production or sales at which total revenues equal total expenses, resulting in no net loss or gain.
Operating Leverage
The degree to which a company uses fixed operating costs, with all else being equal, the higher the operating leverage, the more sensitive net operating income is to a given percentage change in sales.
- Grasp the Cost-Volume-Profit analysis concepts and their graphical representation.
Verified Answer
Learning Objectives
- Grasp the Cost-Volume-Profit analysis concepts and their graphical representation.
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