Cost-Volume-Profit (CVP)analysis Is a Simple but Powerful Tool to Assist

question 43

Multiple Choice

Cost-volume-profit (CVP) analysis is a simple but powerful tool to assist management make operating decisions.Which of the following does not represent a potential use of CVP analysis?

• A)Ability to compute the break-even point.
• B)Ability to determine optimal sales volumes.
• C)Aids in evaluating tax planning alternatives.
• D)Aids in determining optimal pricing policies.

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Definitions:

Book Value

Book Value refers to the net value of a company or an asset calculated by total assets minus intangible assets (patents, goodwill) and liabilities, used to estimate the value of a company on its balance sheet.

Commercial Substance

A characteristic of transactions that indicates a change in future cash flows as a result of economic activities, leading to a real economic impact.

Asset Improvements

Expenditures made to increase the useful life, efficiency, or productive capacity of an asset, typically capitalized and amortized over time.

Ordinary Maintenance

Refers to routine upkeep and repairs necessary to maintain assets in their current condition without improving or extending their life.