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Volume and Contribution Margin

Under the assumptions used in cost-volume-profit analysis, as volume increases:
A. fixed costs increase in proportion to the increase in volume.
B. variable costs per unit remain the same.
C. fixed costs per unit remain the same.
D. variable costs per unit increase in proportion to the increase in volume.

Although contribution margin and cost-volume-profit analysis can be used in service industries, computing unit costs can sometimes be more complex. All of the following statements about unit costs and revenues in the service industry are true EXCEPT:
A. service revenues do not have a tangible nature.
B. it is difficult to trace costs to a particular service.
C. it is generally not possible to use unit costs to make pricing decisions in service industries.
D. services frequently require many transactions provided by a number of departments.

Solution Preview

Under the assumptions used in cost-volume-profit analysis, as volume increases:
A. fixed costs increase in proportion to the increase in volume.
B. variable costs per unit remain the same.
C. fixed costs per unit remain the same.
D. variable ...

Solution Summary

This solution correctly identifies the answers to the questions concerning cost-volume-profit analysis, contribution margins and volumes.

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