Which of the Following Are Necessary Assumptions When Using the Contribution

question 119

Multiple Choice

Which of the following are necessary assumptions when using the contribution margin method of determining the break-even point?

• A)Average unit costs must be known.
• B)There must be an input-related cost driver.
• C)Fixed costs are irrelevant.
• D)Total variable cost must be known.
• E)Unit selling price and unit variable cost must be known.

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Definitions:

Capital Acquisition

The process of acquiring capital assets, which are resources such as machinery, tools, or buildings, used to produce goods or services.

MPC

Marginal Propensity to Consume, which is the fraction of an additional amount of income that is spent on consumption.

Corporation's Capitalization

The total value of a corporation's issued shares of stock, bonds, and long-term debt, reflecting the market's assessment of its total worth.

Common Stock

Common Stock represents ownership in a corporation, giving shareholders voting rights and a share in the company's profits via dividends.