Business 203 Ch2

Front 1

Break-even point:

Back 1

the level of sales at which revenue equals expenses and net income is zero

Front 2

Contribution margin (marginal income):

Back 2

the sales price minus the variable cost per unit.

Front 3

Cost behavior:

Back 3

how costs are related to and affected by the activities of an organization

Front 4

Cost driver:

Back 4

any output measure that causes costs (that is, causes the use of costly resources).

Front 5

Cost of goods sold:

Back 5

the cost of the merchandise that is acquired or manufactured and resold

Front 6

Cost-volume-profit (CVP) analysis:

Back 6

the study of the effects of output volume on revenue (sales), expenses (costs), and net income (net profit).

Front 7

Fixed cost:

Back 7

a cost that is not immediately affected by changes in the cost driver level

Front 8

Gross margin (gross profit):

Back 8

the excess of sales over the total cost of goods sold.

Front 9

Incremental effect:

Back 9

the change in total results (such as revenue, expenses, or income) under a new condition in comparison with some given or known condition.

Front 10

Margin of safety:

Back 10

the planned unit sales less the break-even unit sales; it shows how far
sales can fall below the planned level before losses occur.

Front 11

Operating leverage:

Back 11

a firm’s ration of fixed to variable costs.

Front 12

Relevant range:

Back 12

the limit of cost-driver activity level within which a specific relationship between costs and the cost driver is valid.

Front 13

Sales mix:

Back 13

the relative proportions or combinations of quantities of products that constitute total sales.

Front 14

Variable cost:

Back 14

a cost that changes in direct proportion to changes in the cost driver level

Front 15

Variable-cost ratio (variable-cost percentage):

Back 15

all variable costs divided by sales