4–1 How is the CM per unit calculated? How is this value useful in planning business
4–2 Where is the break-even point on a CVP graph?
4–3 Often the most direct route to a business decision is to perform an incremental analysis. What is meant by an incremental analysis?
4–4 What is meant by the term operating leverage ?
4–5 What is meant by the term margin of safety ?
4–6 If a company experiences a decrease in its CM ratio, what will be the impact on its
break-even level of sales?
4–7 Name three approaches to break-even analysis. Briefly explain how each approach works.
4–8 In a CVP graph, what is the impact on the break-even level of sales if the slope of the
total revenue line gets steeper, assuming no change to the total expense line? What is
the impact on the break-even level of sales if the slope of the total expenses line gets
steeper, assuming no change to fixed expenses or to the slope of the total revenue line?
4–9 What effect would a 30% income tax rate have on the CVP formula?
4–10 What is meant by the term cost structure ?
4–11 Companies X and Y are in the same industry. Company X is highly automated, whereas
Company Y relies primarily on labour to make its products. If sales and total expenses
in the two companies are about the same, which company would you expect to have the
lower margin of safety? Why?
4–12 What is meant by the term sales mix? What assumption is usually made concerning
sales mix in CVP analysis?
4–13 Assume that Company Z, which sells two products, has changed its sales mix so that it
sells a higher proportion of the product with the higher CM. What will be the impact
on the break-even level of sales? Explain your answer.