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20 Cards in this Set
 Front
 Back
breakeven point

the level of sales at which profit is zero. can also be defined as the point where total sales equals total expenses or as the point where total contribution margin equals total fixed expenses.


contribution margin method

a method of computing the breakeven point in which the fixed expenses are divided by the contribution margin per unit.


contribution margin ratio (CM ratio)

the contribution margin as a percentage of total sales.


costvolumeprofit (CVP) graph

the relationships between an organization's revenues, costs, and level of activity presented in graphic form


degree of operating leverage

a measure, at a given level of sales, of how a percentage change in sales volume will affect profits. it is computed by dividing contribution margin by net operating income.


equation method

a method of computing the breakeven point that relies on the equation Sales = Variable expenses + Fixed expenses + Profits


incremental analysis

an analytical approach that focuses only on those items of revenue, cost, and volume that will change as a result of a decision.


margin of safety

the excess of budgeted (or actual) sales over the breakeven volume of sales.


operating leverage

a measure of how sensitive net operating income is to a given percentage change in sales. it is computed by dividing the contribution marginby net operating income.


sales mix

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.


break even point (in terms of units) for CONTRIBUTION APPROACH

(fixed expenses + profits) / unit contribution margin


break even point (in terms of dollars) for CONTRIBUTION APPROACH

(fixed expenses + profits) / contribution margin ratio


unit sales to attain target profits equation

(fixed expenses + target profits) / unit contribution margin


margin of safety in dollars equation

total sales  break even sales


margin of safety in percentage equation

margin of safety in dollars / total sales


degree of operating leverage equation

contribution margin / net operating income


overall CM ratio equation

total contribution margin / total sales


break even sales using overall CM ratio

fixed expenses / overall CM ratio


sales to achieve target profits using overall CM ratio

(fixed expenses + target profits) / overall CM ratio


break even point (in terms of unit) for EQUATION APPROACH

total revenues = TVC + TFC
