Effective Use of the CVP (Cost-Volume-Profit) Model Requires an Understanding

question 60

Multiple Choice

Effective use of the CVP (cost-volume-profit) model requires an understanding of all of the following concepts, except:

• A) Contribution margin per unit.
• B) Contribution margin ratio.
• C) Contribution income statement.
• D) Total cost of goods sold (CGS).
• E) Variable versus fixed cost behavior patterns.

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Definitions:

Direct Labor Hours

Direct Labor Hours are the total hours worked by employees directly involved in the production of goods or services.

Budgeted Costs

Anticipated expenses for a specific period of time, used for planning and control purposes.

Cost Centers

Parts of an organization where costs can be traced, but direct revenues are not generated, used for budgeting and cost management purposes.

Performance Report

A document or record that outlines the performance of a specific activity or function within a set period, usually compared against set goals or standards.