Question

Which of the following is NOT a method used for basic CVP analysis?

a) Profit equation
b) unit contribution margin
c) Break even analysis
d) contribution margin ratio

Answer 1

The method NOT used for basic CVP analysis is the contribution margin ratio.

Step-by-step explanation:

The correct answer is d) contribution margin ratio.

Basic CVP (Cost-Volume-Profit) analysis involves understanding the relationship between costs, volume, and profit. It helps businesses make informed decisions about pricing, sales volume, and cost management.

The methods used in basic CVP analysis include:

1. Profit equation: This equation calculates the profit by subtracting total costs from total revenues.
2. Unit contribution margin: This is the difference between the selling price of a unit and its variable cost. It represents the amount each unit contributes towards covering fixed costs and generating profit.
3. Break even analysis: This analysis determines the point at which total revenues equals total costs, resulting in zero profit or loss. It helps identify the sales volume needed to break even.

Therefore, the method NOT used for basic CVP analysis is the contribution margin ratio.