True, CVP analysis studies how changes in costs, volume and selling price affect profit., Variable cost per unit is assumed to remain constant within the relevant range., Contribution Margin = Sales Revenue − Total Variable Costs., RM50 − RM30 = RM20 per unit., At break-even, total revenue equals total costs and operating profit is zero., RM60,000 ÷ RM20 = 3,000 units., A higher selling price increases contribution margin per unit, reducing break-even units., Margin of Safety = Actual Sales − Break-even Sales., (RM40,000 + RM10,000) ÷ RM25 = 2,000 units., The break-even point on a profit–volume graph is where operating profit equals zero., Target Profit = Investment × Required Rate of Return, where the return is defined on the same profit basis., False, Total fixed costs remain constant within the relevant range., Total variable costs change proportionately with activity volume., Contribution Margin Ratio = Contribution Margin ÷ Sales Revenue., Break-even Units = Fixed Costs ÷ Contribution Margin per Unit., Higher fixed costs increase the break-even point when other factors remain unchanged., A positive margin of safety indicates sales are above the break-even point., Target Sales Units = (Fixed Costs + Target Profit) ÷ Contribution Margin per Unit., Break-even occurs where total revenue intersects total cost, not the fixed cost line., Basic CVP analysis assumes constant variable cost per unit within the relevant range

CVP

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