Cost Volume Profit Analysis Is Based on the Separation of Fixed

question 39

Multiple Choice

Cost volume profit analysis is based on the separation of fixed and variable costs. The analysis can be stated as an equation as follows: P = a(b - c) - d. In this statement of the equation, P is the profit, and

• A) b is the price per unit; c is the variable cost per unit; a is the number of units produced; d is the fixed cost.
• B) b is the number of units produced; c is the fixed cost; a is the price per unit; d is the variable cost per unit.
• C) b is the fixed cost; c is the number of units produced; a is the variable cost per unit; d is the price per unit.
• D) All of the given answers are incorrect because they all refer to the number of units produced. In fact, profit is determined according to the number of units sold.

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