Cornerstones of Managerial Accounting Study Set 2
Quiz 4: Cost-Volume-Profit Analysis: a Managerial Planning Tool
The Operating Leverage Measures the Difference Between Actual Sales and Break-Even
The operating leverage measures the difference between actual sales and break-even point in dollar sales.
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Operating leverage is the use of variable cost to extract higher percentage changes in profits as sales activity changes.
Which of the following best describes the break-even point? A) the point at which total sales equal total cost B) the point at which fixed costs equal variable costs C) the point at which total sales are less than total cost D) the point at which total sales are greater than total cost
What is the purpose of doing a cost-volume-profit (CVP) analysis? A) CVP analysis is effectively used by single-product firms only. B) CVP analysis provides managers with information used for control only. C) CVP analysis shows how revenues, expenses, and profits behave as volume changes. D) CVP analysis allows managers to do sensitivity analysis by examining the impact of various prices or costs on volume.
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