Question 25

An assumption under CVP analysis is that:

		Fixed costs will remain fixed in the long run
		All relevant costs can be broken down into their fixed and variable components
		Variable costs will change in inverse fashion with sales revenue
		Total costs will not increase as sales revenue increases

10 points

Question 26

On a breakeven graph, the breakeven point is the point where the:

		Sales revenue and total cost lines intersect
		Sales revenue and fixed cost lines intersect
		Sales revenue and variable cost lines intersect
		Total cost line intersects the vertical axis

10 points

Question 27

In using the CVP equation, the sales level required in units to breakeven is determined by dividing:

		Fixed costs by contribution margin in dollars
		Fixed costs plus operating income by 100% minus the variable cost percentage
		Fixed costs plus net income by the contribution margin percent
		The sales level in dollars by unit variable cost

10 points

Question 28

An advantage of budgeting is that:

		Those involved in budgeting are obliged to look ahead and be flexible
		The unpredictable future is an excuse for not having fairly accurate estimates
		If budgeted expenses are overestimated, there will be extra money at the end of the period for staff bonuses
		Staff involved in budgeting will learn about confidential management matters