Cost-Volume-Profit (CVP) Analysis Is a Simple but Powerful Tool to Assist

question 117

Multiple Choice

Cost-volume-profit (CVP) analysis is a simple but powerful tool to assist management in making operating decisions. Which of the following does not represent a potential use of CVP analysis?

• A) Ability to compute the break-even point.
• B) Ability to determine optimal sales volumes.
• C) Aids in evaluating tax planning alternatives.
• D) Aids in determining optimal pricing policies.

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Definitions:

Common Shares

Equity securities that represent ownership in a company, providing voting rights and potential dividends to shareholders.

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from revenue, indicating the company's financial performance over a specific period.

Retained Earnings

The portion of net income that is not distributed to shareholders but is kept by the company to reinvest in its core business or to pay debt.

Net Income

The sum a company holds onto after subtracting expenses and taxes from the total revenue earned.