QUESTION9 All of the following are examples of decisions for which cost-volume-p

ID: 2413015 • Letter: Q

Question

QUESTION9 All of the following are examples of decisions for which cost-volume-profit analysis helps managers except: O What marketing strategy should be used to sell products and services? o what products and services should be offered? O How can taxes be eliminated from the cost structure? O What prices should be charged to customers? QUESTION 10 Which of the following statements is true with regard to the contribution margin ratio? The contribution margin ratio is calculated by dividing sales by contribution margin. The products with the lowest contribution margin should be emphasized. The contribution margin ratio shows how the contribution margin will be affected by a change in totai sales The contribution margin ratio is calculated by dividing sales minus cost of goods sold by sales.

Explanation / Answer

Answers

All are true statement except:

Correct Answer - Option 1st: What marketing Strategy should be used to sell products and services.

Choosing marketing strategy is not part of Cost Volume Profit analysis.

CVP analysis is used to determine which product to offer, how cost can be minimised, and what prices can be charged.

Correct Answer - Option 3rd: Contribution margin ratio shows how the contribution margin will be affected by change in total sales.

Example:

Sales

$ 20,000.00

$ 30,000.00

5000

Contribution margin ratio

20%

Contribution margin

$ 4,000.00

$ 6,000.00

$ 1,000.00

Above example shows how contribution margin will be affected if sales increases or decreases and by how much if contribution margin ratio = 20%