Student Forums CMA Part 2 Section C: Decision Analysis C.1. CVP Analysis Question ID: CIA 577 IV.11 (Topic: CVP Analysis)

# Question ID: CIA 577 IV.11 (Topic: CVP Analysis)

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Syrina Nabil Marie Gabra
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How is the answer an increase in the semi variable cost per unit when one of the assumptions of CVP analysis that all costs are either variable or fixed excluding and mixed costs?

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Lynn Roden
HOCK international

Hello Syrina Nabil Marie Gabra,

That is a very perceptive question. You are correct that in order to use CVP analysis, it is necessary to have and use only fixed and variable costs. However, in the real world, that is not the way things are. And an increase in either or both fixed and variable costs will increase the breakeven point in the real world.

Semi-variable costs can be separated into their fixed and variable components. The method for doing that is given in your CMA Part 1, Volume 2 textbook. In the current edition, it is in Study Unit 15 in Section D, starting on page 102. The title of the Study Unit is “Estimating Fixed and Variable Costs.” So if someone were performing breakeven analysis and encountered a semi-variable cost, he or she could use that method to segregate the fixed portion of the cost from the variable portion.

But that would not be necessary to answer this question. The answer choice “an increase in the semi-variable cost per unit” is the only answer from among the choices given that could possibly increase the breakeven point. Therefore, it is the best answer to the question. And when you are answering multiple-choice questions, the correct answer will always be the best answer. It may not be a perfect answer, but if it is the best answer from among the choices given, it will be the right answer.

Lynn

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