Which of the Following Statements Is Correct with Regard to a Cost-Volume-Profit

question 74

Multiple Choice

Which of the following statements is correct with regard to a Cost-Volume-Profit graph?

• A) A Cost-Volume-Profit graph shows the maximum possible profit.
• B) A Cost-Volume-Profit graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.
• C) A Cost-Volume-Profit graph assumes that total expense varies in direct proportion to unit sales.
• D) A Cost-Volume-Profit graph shows the operating leverage as the gap between total sales revenue and total expense at the actual level of sales.

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Definitions:

Money Income

The total amount of monetary earnings received by an individual or household, including wages, salaries, and investment returns.

Fixed

Relates to assets or costs that do not change with the level of production or business activity in the short term.

Linear

A term describing something arranged in or extending along a straight or nearly straight line.

Indifference Curves

Graphical representations used in microeconomics to show combinations of two goods that give a consumer equal satisfaction and utility.