4 Questions
Which of the following best describes variable cost?
A cost that varies in direct proportion to changes in the level of activity
What is the characteristic of fixed cost?
It remains constant regardless of the level of activity
In CVP analysis, what is meant by 'break-even' point?
The point where no profit or loss is incurred
What does 'margin of safety' represent in CVP analysis?
The difference between actual sales and the break-even sales
This quiz covers the concepts of variable and fixed cost behavior in Cost-Volume-Profit (CVP) analysis, including understanding the concepts of break-even and margin of safety. It discusses how costs behave in response to changes in the level of activity, characterizing costs as variable, fixed, or mixed.
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