The 'Cost Volume Profit' (CVP) analysis is a tool for: MCQ with Answer and Explanation

Question

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The 'Cost Volume Profit' (CVP) analysis is a tool for:

A. Tax planning

B. Inventory valuation

C. Understanding relationship between cost, volume, and profit

D. Audit

Answer: Option C

Solution (By JKSSB Mock Tests)

CVP analysis helps in profit planning by studying effects of changes in costs and volume.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

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A: The Purchases Book records only credit purchases of goods. R: Cash purchases of goods are recorded in the Cash Book. Choose the correct option.

A. Both A and R are true and R is the correct explanation of A

B. Both A and R are true but R is NOT the correct explanation of A

C. A is true but R is false

D. A is false but R is true

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Correct Answer: Option A

Explanation:
The Purchases Book is strictly for credit purchases of trading goods. Cash purchases are recorded in the Cash Book. R correctly explains why cash purchases are excluded from the Purchases Book.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

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The 'Excess Grant' is:

A. Supplementary grant

B. Token grant

C. Grant not utilized

D. Expenditure in excess of voted grant

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Correct Answer: Option D

Explanation:
Excess grant is the amount spent over the original grant, requiring regularization by Parliament.

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Question #3

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A 'Sleeping Partner' is one who:

A. Has unlimited liability only

B. Manages the firm

C. Guarantees profits

D. Invests capital but does not take part in day-to-day management

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Correct Answer: Option D

Explanation:
Sleeping or dormant partner contributes capital but does not participate in management.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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