Cost, Volume, and Profit Analysis MCQs

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on March 25, 2022

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Frequently Asked Questions

What happens if the Contribution Margin is positive?

If a product’s Contribution Margin is negative, the company is losing money with each unit it produces, and it should either drop the product or increase prices. If a product has a positive Contribution Margin, it’s probably worth keeping.

What is a good Contribution Margin?

Contribution Margin is a product’s price minus all associated variable costs, resulting in the incremental profit earned for each unit sold.

What is a good Contribution Margin?

What is a good Contribution Margin?

What technique analyzes the cost-volume-profit relationship?

Cost, volume, and profit relationships (CVP analysis)

What is the purpose of doing a cost-volume-profit CVP analysis?

Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm’s profit. Companies can use CVP to see how many units they need to sell to break even (cover all costs) or reach a certain minimum profit margin.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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