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11 Cards in this Set
- Front
- Back
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the level of sales at which profit is zero
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break even point
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a method of computing the break even point in which the fixed expenses are divided by the contribution margin per unit
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contribution margin method
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cm ratio
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a ratio computed by dividing contribution margin by dollar sales
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cost volume profit graph
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a graphical representation of the relationships between an organizations revenues, costs, and profits on the one hand and its sales volume on the other hand
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degree of operating leverage
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a measure, at a given level of sales, of how a percentage change in sales will affect profits. the degree of operating leverage is computed by dividing contribution margin by net op income
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equation method
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a method of computing the break even point that relies on the equation sales=variable expenses + fixed expenses + profits
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incremental analysis
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an analytical approach that focuses only on those costs and revenues that change as a result of a decision
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margin of safety
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the excess of budged (or actual) dollar sales over the break even dollar sales
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operating leverage
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a measure of how sensitive net operating income is to a given percentage change in dollar sales
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sales mix
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the relative proportions in which a company's products are sold. sales mix is computed by expressing the sales of each product as a percentage of total sales
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variable expense ratio
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a ratio computed by dividing variable expenses by dollar sales
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