Question

A) Variable cost per unit is constant throughout various relevant ranges.

B) If the volume of activity doubles in the relevant range, total variable costs will also double.
C) higher fixed costs decrease the total contribution margin required to breakeven.
D) the breakeven point is the point where salses revenues are equal to the fixed costs.
E) sensitivity analysis empowers managers with better information for desicion making by analyzing how various business stratiges will affect profits earned by the company.
F) Absorption costing is the only method used in short-term desicion making.
G) When there are no units in the beginning finished goods inventory and the units produced are more than the units sold, the operating income will be higher under variable costing.
H) The amount by which sales can decrease before the company incurs an operating loss is called breakeven point.
I) when setting sales prices in the long-run, the sales price must cover the full cost including fixed costs.
J)The sales level at which operating income is zero is called breakeven point.

Answer 1

The correct statements are:

A) Variable cost per unit is constant throughout various relevant ranges.

J) The sales level at which operating income is zero is called breakeven point.

Step-by-step explanation:

Statement A is accurate because, by definition, variable costs per unit remain constant within a relevant range. This means that for every additional unit produced, the variable cost per unit remains the same. The constant nature of variable costs per unit is a fundamental concept in cost accounting, enabling accurate cost estimation and analysis.

Statement J correctly defines the breakeven point as the sales level at which operating income is zero. At this point, total revenues equal total costs, resulting in no profit or loss. The breakeven point is a critical metric for businesses as it helps determine the sales volume needed to cover all costs and achieve a neutral financial position.

Understanding these concepts is vital in managerial accounting and decision-making processes. Variable costs are essential for cost-volume-profit analysis, while the breakeven point guides businesses in setting sales goals and making informed financial decisions. Both statements contribute to a solid foundation in managerial accounting principles, supporting effective business planning and strategy.