MGT223H5 Study Guide - Final Guide: Earnings Before Interest And Taxes, Total Absorption Costing, Operating Leverage
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Part i multiple choice questions (20 marks 2 marks each) Please briefly explain the assumptions. (5 marks: selling price is constant throughout the entire relevant range. The price of a product or service will not change as volume changes: costs are linear throughout the entire relevant range, and they can accurately be divided into variable and fixed elements. The variable element is constant per unit, and the fixed element is constant in total over the entire relevant range: in multiproduct companies, the sales mix is constant, in manufacturing companies, inventories do not change. The number of units produced equals the number of units sold. What caution must be exercised in their use? (5 marks) A participative budget is one in which persons with responsibility over cost control prepare their own budgets. This is in contrast to a budget that is imposed from above.
