C total variable costs remain constant over the

c) Total variable costs remain constant over the relevant range.
d) Cost behaviour can change as long as total costs remain the same at all activity levels.
20. Which of the following is an underlying assumption of CVP analysis?
a) Factors other than changes in activity may affect costs.
b) Cost classifications are reasonably accurate.
c) Increases in inventories cause increase in total fixed costs.
d) Unit costs remain the same over the relevant range.
21. In which one of the following calculations would CVP analysis be most important?
22. To which function of management is CVP analysis most applicable? 23. Which of the following is the correct formula for the contribution margin per unit? 24. Sarks Company has a contribution margin of $150,000 and a contribution margin ratio of
30%. How much are total variable costs?
a) $45,000
b) $350,000
c) $105,000
d) $500,000
Solution: ($150,000 /.30) – $150,000 = $350,000
25. Which of the following is the correct formula for the contribution margin ratio?
26. Hardage Company has a contribution margin per unit of $15 and a contribution margin ratio
of 60%. How much is the selling price of each unit?

b) $37.50
c) $9
d) Cannot be determined without more information.
Solution: ($15 /.60) = $25
27. Sales are $60,000 and variable costs are $45,000. How much is the contribution margin
ratio?