Question

In a CVP income statement, cost of goods sold is generally:

a) completely a variable cost.
b) completely a fixed cost.
c) neither a variable cost nor a fixed cost.
d) partly a variable cost and partly a fixed cost.

Answer 1

d) partly a variable cost and partly a fixed cost.

Step-by-step explanation:

CVP income statement is also known as cost volume profit income statement, it is generally a product of CVP analysis and it include five elements:

• Price of products.
• Volume of activity.
• Variable cost per unit.
• Total fixed cost.
• Mix of product sold.

CVP analysis are conducted to know how changes in cost and volume would impact company´s operating income and net income. It require all the cost of company should be segregated into variable and fixed cost. It also calculate contribution margin, which help to identify the profit of company before deducting fixed cost.