Cost Analysis and Profitability Quiz

Total cost comprises fixed and variable costs.

Fixed costs do not change with the level of production.

Variable costs change proportionally with production levels.

Cost-benefit analysis assesses whether the benefits of a project outweigh its costs.

Contribution margin indicates the portion of revenue available to cover fixed costs and profit.

At the break-even point, there is no profit or loss.

ROI evaluates the efficiency of an investment in generating profit.

Cost of Goods Sold is subtracted from revenue to calculate operating profit.

Marginal cost represents the increase in total cost from producing one more unit.

Average cost represents the cost per unit of production.

Net profit accounts for all expenses, while gross profit only considers direct costs.

Net profit margin represents the percentage of revenue that translates to profit.

Sunk costs are already incurred and cannot be recovered.

Opportunity cost is the value of the next best alternative foregone.

Cost allocation distributes indirect costs to identifiable cost objects.

Random assignment is not a legitimate method for allocating costs.

Operating profit is the revenue remaining after deducting fixed costs.

Increasing variable costs would decrease profitability.

Margin of safety indicates how much sales can drop before incurring losses.

Contribution margin ratio indicates the percentage of revenue available to cover fixed costs and profit.

Contribution margin per unit indicates the amount available to cover fixed costs and profit per unit sold.

Price elasticity of demand is influenced by various factors including substitutes, necessity, and proportion of income.

At the profit-maximizing output level, marginal revenue equals marginal cost.

Marginal analysis examines the effects of producing one additional unit on total costs and revenue.

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price.