One of the First Steps to Take When Using CVP

question 64

Multiple Choice

One of the first steps to take when using CVP analysis to help make decisions is:

• A)calculation of the degree of operating leverage for the company.
• B)finding out where the total costs line intersects with the total revenues line on a graph.
• C)estimating how many products will have to be sold to make a decent profit.
• D)identifying which costs are variable and which costs are fixed.

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Definitions:

Accounts Payable

Accounts payable is the amount of money a company owes to its suppliers or creditors for goods and services purchased on credit.

Inventory

Raw materials, work-in-process products, and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Sales Journal

A dedicated financial ledger designed for documenting all credit sales transactions.

Posting

The act of recording financial transactions in the ledger of an accounting system.