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Questions and Answers
What are fixed costs?
Costs that remain constant regardless of the change in activity level.
Define variable costs.
Costs that change directly and proportionately with the level of activity.
Explain mixed costs.
Costs that possess both fixed and variable elements, making them difficult to describe by a single behavior pattern.
What are step costs?
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What is the Time Assumption in cost behavior patterns?
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Explain the Relevant Range Assumption.
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What technique involves selecting the highest and lowest activity levels and their corresponding costs to calculate the variable cost per unit of activity?
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Which statistical technique is used to develop an equation that predicts an unknown value of a dependent variable based on one or more independent variables?
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What does CVP Analysis systematically examine the relationships among?
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What does the Contribution Margin Method focus on determining?
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In the Graphical Method, what is represented graphically?
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What does the breakeven point represent?
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What important information does the position of the breakeven point provide to management?
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What is the first assumption in CVP Analysis regarding the behavior of total revenue?
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What is the second assumption in CVP Analysis regarding the behavior of total expenses?
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What equation is followed in the Equation Method of modeling?
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What is the formula for Contribution Margin?
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Define Breakeven Point in Units.
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What does Gross Profit equal to zero signify?
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What is Profit Targeting in the context of profit planning?
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What does a negative Degree of Operating Leverage (DOL) indicate?
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Explain the concept of Sales Mix.
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What is the purpose of determining the breakeven point in cost-volume-profit (CVP) analysis?
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Explain the concept of Margin of Safety in relation to breakeven analysis.
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What does Degree of Operating Leverage (DOL) measure and how does it impact an organization?
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What are the components of Prime Cost in manufacturing?
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In managerial accounting, how is Profit calculated?
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What is the importance of known and constant selling price, variable cost per unit, and total fixed costs in cost-volume-profit analysis?
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How does Profit Targeting differ from calculating the breakeven point?
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Explain the concept of Contribution Margin in financial analysis.
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What is the significance of Consistent Inventory Levels assumption for manufacturing firms?
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How does the Constant Sales Mix assumption impact cost-volume-profit analysis in multiproduct organizations?
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