True or False Questions.

1. A contribution approach income statement can usually be easily prepared from the information

contained in a corporation's published income statement.

True False

2. The profit in cost-volume-profit equations is the same as the net operating income on a

contribution income statement.

True False

3. On a cost-volume-profit graph, the revenue line will be shown above the total expense line for any

activity level above the break-even point.

True False

4. On a CVP graph for a profitable company, the line representing total expenses is steeper than the

line representing total revenue.

True False

5. The contribution margin ratio measures the effect on the total contribution margin of a given

change in total sales.

True False

6. A company with sales of RM100,000, variable expenses of RM70,000, and fixed expenses of

RM50,000 will reach its break-even point if sales are increased by RM20,000.

True False

7. At the break-even point, variable expenses and fixed expenses are equal.

True False

8. All other things the same, a decrease in variable expense per unit will reduce the break-even

point.

True False

9. An increase in the number of units sold will decrease the break-even point.

True False

10. All other things equal, the margin of safety in a company with high fixed costs and low variable

costs will tend to be higher than the margin of safety in a similar company that has low fixed costs

and high variable costs.

True False