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Question 132

Which of the following statements is true regarding cost-volume-profit analysis?

Contribution margin is the amount remaining from sales revenue after fixed expenses have been deducted.

Breakeven point is the amount of units sold to cover variable costs.

Breakeven occurs when the contribution margin covers fixed costs.

Following breakeven, net operating income will increase by the excess of fixed costs less the variable costs per units sold.

Correct Answer: C

Breakeven occurs when the contribution margin covers fixed costs. This means that the revenue from sales exactly meets the combined amount of variable and fixed costs, resulting in neither profit nor loss. The contribution margin is the amount of sales revenue remaining after deducting variable costs, which is then used to cover fixed costs. Therefore, the correct statement with regard to cost-volume-profit analysis is that breakeven occurs when the contribution margin covers fixed costs.

Discussion

MarkWangOption: C

THE ANSWER IS C LOTS OF ERROR ABOUT THIS TOPIC

SAA1Option: A

as per the link - the correct definition is "The contribution margin represents sales revenue left over after deducting variable costs from sales. It is the amount remaining that will contribute to covering fixed costs and to operating profit (hence, the name contribution margin)." Pls correct the answer.

ElvinOption: C

Please correct this. It should be C