Which of the Following Equations Highlights the Cost-Volume-Profit Relation

question 62

Multiple Choice

Which of the following equations highlights the cost-volume-profit relation?

• A)Profit before taxes = [(Price x Unit variable cost) ÷ Sales volume in units] - Fixed costs.
• B)Profit before taxes = [(Price - Unit fixed cost) x Sales volume in units] - Variable costs.
• C)Profit before taxes = [(Price - Total variable cost) x Sales volume in units] - Fixed costs.
• D)Profit before taxes = [(Price - Unit variable cost) x Sales volume in units] - Fixed costs.
• E)Profit before taxes = [Price - (Unit variable cost - Unit fixed cost)] x sales volume in units.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or business activity, such as materials and labor.

Operating Income

Earnings before interest and taxes (EBIT), representing the amount of profit realized from a business's operations.

Fixed Costs

Expenses that do not change with the level of output or production, such as rent, salaries, and insurance.

Variable Costs

Expenses that fluctuate based on the amount of products or services a company generates.