One of the first steps to take when using CVP analysis to help make decisions is ________.
A) calculating the break-even point
B) identifying the variable and fixed costs
C) calculation of the degree of operating leverage for the company
D) estimating the volume of sales to make a good profit

Question

Quizplus · Accepted Answer

Identifying the variable and fixed costs is one of the initial steps in cost-volume-profit analysis as it helps to determine the contribution margin, which is computed by subtracting variable expenses from sales. This information also helps in calculating the break-even point and making decisions related to pricing, cost control, and profitability. Choice A, C, and D are also important steps but are not the first step in applying cost-volume-profit analysis.

One of the First Steps to Take When Using CVP