Which of the Following Statements Is True When Making Decisions

question 81

Multiple Choice

Which of the following statements is true when making decisions using cost-volume-profit (CVP) analysis?

• A) As long as the contribution margin is a positive number,net income will be positive.
• B) As long as variable costs are more than fixed costs,net income will be negative.
• C) As long as the contribution margin is greater than fixed costs,net income will be positive.
• D) As long as the sales price per unit is greater than fixed costs per unit,net income will be positive.

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Definitions:

Incremental Variable Cost

Describes the additional costs incurred when producing one extra unit of a product, including expenses related to materials and labor directly associated with the production.

Incremental Fixed Cost

Additional fixed costs that are incurred when a company expands its operations or production levels beyond the current scope.

Order Size

The quantity of goods or services purchased in a single transaction or order, which can impact volume discounts, shipping costs, and inventory management.

Trade-off

A situation that involves losing one quality or aspect of something in return for gaining another quality or aspect.