As per CVP,operating income calculations use ________.
A) net income and dividends
B) income tax expense and net income
C) contribution margins and fixed costs
D) nonoperating revenues and nonoperating expenses

Question

Quizplus · Accepted Answer

CVP (cost-volume-profit) analysis focuses on the relationship between sales volume, costs, and profits. Operating income is calculated by subtracting all variable costs (which consist of cost of goods sold and variable operating expenses) from the total sales revenue. This leaves the contribution margin, or the amount of sales revenue that is available to cover fixed costs (such as rent, insurance, salaries, etc.) and achieve a profit. Therefore, contribution margins and fixed costs are the key elements used in operating income calculations for CVP analysis. Net income, dividends, income tax expense, nonoperating revenues, and nonoperating expenses are not relevant to CVP analysis.

As Per CVP,operating Income Calculations Use ________