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CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS TRUE/FALSE 1. To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components. Answer : True/False 2. It is assumed in CVP analysis that the unit selling price, unit variable costs, and unit fixed costs are known and constant. Answer : True/False 3. In CVP analysis, variable costs include direct variable costs, but do not include indirect variable costs. Answer : True/False 4. In CVP analysis, an assumption is made that the total revenues are linear with respect to output units, but that total costs are non-linear with respect to output units. Answer : True/False 5. If the selling price per unit is $20 and the contribution margin percentage is 30%, then the variable cost per unit must be $6. Answer : True/False 6. The selling price per unit is $30, variable cost per unit $20, and fixed cost per unit is $3. When this company operates above the breakeven point, the sale of one more unit will increase net income by $7. Answer : True/False 7. If the selling price per unit of a product is $50, variable costs per unit are $40, and total fixed costs are $50,000, a company must sell 6,000 units to make a target operating income of $10,000. Answer : True/False 3-1 8. An increase in the tax rate will increase the breakeven point. Answer : True/False 9. If variable costs per unit increase, then the breakeven point will decrease. Answer : True/False 10. If a company increases fixed costs, then the breakeven point will be lower. Answer : True/False 11. Companies that are substituting fixed costs for variable costs receive a greater per unit return above the breakeven point. Answer : True/False 12. A company with a high degree of operating leverage is at lesser risk during downturns in the economy.... View Full Document

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