One of the first steps to take when using CVP analysis to help make decisions is:
A)finding out where the total costs line intersects with the total revenues line on a graph.
B)identifying which costs are variable and which costs are fixed.
C)calculation of the degree of operating leverage for the company.
D)estimating how many products will have to be sold to make a decent profit.

Question

Quizplus · Accepted Answer

The first step in using CVP analysis is to differentiate between fixed costs and variable costs because this information is used to calculate contribution margin and break-even point. Without understanding these basic concepts, it is not possible to accurately analyze the impact of changes in sales volume on profits.

One of the First Steps to Take When Using CVP