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:

Compounded Semiannually

Interest that is calculated and added to the principal balance twice a year.

Equivalent Rate

The interest rate that would produce the same compounded financial result over a specific period as a differently compounded interest rate.

Compound Annual Rate

The rate at which a sum of money would grow if it were compounded once per year.

Mining Town

A community developed to house miners and is located near mining operations.