Which Statement Is Not True About Cost-Volume Profit (CVP)analysis

question 142

Multiple Choice

Which statement is not true about cost-volume profit (CVP) analysis?

• A)CVP analysis is a powerful tool for planning and decision making.
• B)CVP analysis allows managers to do sensitivity analysis by examining the impact of various prices or cost levels on profit.
• C)CVP analysis shows how revenues,expenses,and profits behave as volume changes.
• D)CVP analysis can be used in both single-product and multi-product firms.
• E)All of these statements are true.

---

Definitions:

Stockholders

Individuals or entities that own shares in a corporation, giving them partial ownership and possibly the right to vote on company matters.

Degree Of Operating Leverage (DOL)

A measure that assesses the sensitivity of a company's operating income to its sales, indicating the percentage change in operating income for a percentage change in sales.

Degree Of Financial Leverage (DFL)

A ratio indicating how much a company's earnings before interest and taxes (EBIT) can be affected by a change in its capital structure.

EPS

Earnings Per Share – a company's profit divided by the outstanding shares of its common stock, providing an indicator of the company's profitability.