Chapter 6 Lab Exercise Solutions

# Chapter 6 Lab Exercise Solutions - Ch 6 Cost-Volume-Profit...

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Ch 6 – Cost-Volume-Profit Analysis and Variable Costing SOLUTION 1. Indicate whether the following statements are True (T) or False (F): __ F ___ Sales revenue minus fixed costs is known as the “contribution margin”. Sales – Var. Costs __ F ___ Cost of goods sold will be one of the items found on a contribution margin income statement. __ T ___ The sales revenue amount will be the same for both a contribution margin income statement and a traditional income statement. __ F __ Decision-makers outside an organization (i.e. creditors and stockholders) will have access to a company’s contribution margin format income statement. __ T ___ If a company’s management wishes to figure out how many units need to be sold in order to earn a target profit, the contribution margin format income statement is preferable over the traditional format income statement. __ T ___ “Break-even” is the level at which net income is equal to zero. __ F ___ At the break-even point, contribution margin is equal to variable costs. CM = FC __ F __ The contribution margin ratio is computed by taking the contribution margin and dividing it by net income. __ T __ A constant sales mix and sales price are two of the major assumptions underlying cost- volume-profit analysis. __ T

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## This note was uploaded on 11/22/2010 for the course ACC 200 taught by Professor Buckless during the Spring '08 term at N.C. State.

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Chapter 6 Lab Exercise Solutions - Ch 6 Cost-Volume-Profit...

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