In CVP Analysis, Focusing on Target Net Income Rather Than

question 201

Multiple Choice

In CVP analysis, focusing on target net income rather than operating income ________.

• A) will increase the breakeven point
• B) will decrease the breakeven point
• C) will not change the breakeven point
• D) will help managers construct a better capital policy

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Definitions:

Accounts Receivable

Funds due to a company for goods or services delivered or used but not yet paid for by customers.

Bad Debt Expense

An expense account that represents accounts receivables that a company does not expect to collect due to customers' inability to fulfill payment obligations.

Uncollectible Accounts Expense

Expenses related to uncollectible amounts from credit sales.

Allowance Account

A contra account that reduces the total amount of accounts receivable on the balance sheet to reflect uncollectible amounts.