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4. Cost-Volume-Profit (IV): 6 marks (i) Which of the following statement is correct: a. Operating leverage is the ratio of fixed costs to total variable
4. Cost-Volume-Profit (IV): 6 marks (i) Which of the following statement is correct: a. Operating leverage is the ratio of fixed costs to total variable costs b. Operating leverage is a measure of the financial risk of the business c. Operating leverage is the ratio of fixed costs to total costs d. Operating leverage is a function of sales risk (ii) One of the underlying assumptions of CVP calculations is that in the relevant range, a. fixed costs stay fixed b. all costs can be divided into variable and semi-variable C. cost behaviour is non-linear d. selling price per unit changes as volume changes (iii) The contribution margin ratio a. Is used when the number of units are not available b. Is used when the total fixed costs are not available C. Measures the contribution sales makes to profit d. Measures the contribution margin divided by variable cost (6 marks)
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