Cost– Volume Profit Relationship Brief Questions With Answer

1. What is Break Even Point?
Ans:Break -even point is the level of activity at which an organisation neither earns a profit not incurs a loss.

2. Write down the formula of break-even point?
Ans: BEP=Fixed cost÷(Sales-Variable cost).

3. What do you mean by break-even chart?
Ans:When the relationship between revenue, cost and level of activity in an organisation presented in graphic from is called Break-even chart.

4. What is cost driver?
Ans:Any output measure of resources and activities is called cost driver.

5. What do you mean by margin of safety?
Ans: The excess of budget sales over the Break-even volume of sales is called margin of safety.

6. What is the contribution margin   ratio?
Ans: The contribution margin as a percentage of total sales in the C/M ratio.

7. Write down the formula of contribution margin?
Ans: Contribution margin=Total sales– Total variable cost.

8. Write down the formula of contribution margin ratio?
Ans: C/M ratio=Total contribution margin÷Total sales×100.
    
9. What is profit volume ratio?
Ans:The ratio that is used to analysis the relation between contribution ans sales known as profit volume ratio
.
10. What is sales mix?
Ans: Sales mix is the relative combination in which a company's product are sold.

11. What is production cost?
Ans: Production cost identified with goods produced or purchase for resale.

12. What is the degree of leverage?
Ans: The numerical measure of the firm's operating leverage.

13. What call marginal cost?
Ans: The additional cost resulting from producing and selling one additional unit is called marginal cost.

14. What is mark up?
Ans: It is an amount by which price exceeds cost.

15. What is marginal revenue?
Ans: The additional revenue  resulting from the sale of an additional unit is called marginal revenue .