# 710_C16

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The flashcards below were created by user Calbrenar on FreezingBlue Flashcards.

1. break even point
point of zero profit
2. Two frequently used approaches to finding the Break Even Point
• operating income approach
• contribution margin approach
3. operating income
• income or profit before income taxes
• Net Income / (1 - Tax Rate)
4. net income
operating income - income taxes
5. variable product cost per unit
direct materials + direct labor + variable overhead
6. variable cost per unit
direct materials + direct labor + variable overhead + variable selling expense
7. constribution margin per unit (unit contribution margin)
price - variable cost per unit (DM/DL/VO/VSE)
8. contribution margin ratio
contribution margin (price-variable cost per unit) / price OR (sales - total variable cost) / sales
9. break even units
Total fixed cost / (price - variable cost per unit)
10. when does total revenue = total cost
at the break even point
11. contribution margin
sales revenue - total variable costs
12. number of units
fixed costs / unit contribution margin
13. to calculate operating income yield
divide unit contribution margin into the target profit and add result to break even volume
14. proportion of each sales dollar available to cover fixed costs and provide for profit
contribution margin ratio (1 = contribution margin ratio + variable cost ratio)
15. break even sales
total fixed costs / contribution margin ratio
16. multiple product income statement
Sales/Variable Expenses/Contribution Margin/Direct Fixed Expenses/Product margin ---Separate

Common Fixed Expenses subtracted from total to get Operating income
17. direct fixed expenses
fixed cost that can be traced to each segment and can be avoided if that segment doesn't exist
18. common fixed expenses
not traced to any segment and exist even if segment eliminated (senior management plant overhead etc)
19. sales mix
relative combination of products being sold. Can be ratio or % of total revenue
20. profit volume graph
portrays the relationship between profits and sales volume.

operating income equation (OI = (price x units) - (unit variable cost x units) - fixed costs)
21. cost volume profit graph
relationship among cost volume and profits. graph total revenue line and total cost line.

revenue = price x units

total cost = (unit variable cost x units) + fixed costs
22. assumptions of cost volume profit analysis
linear revenue function and linear cost function

price, total fixed costs, and unit variable costs can be accurately identified and remain constant over the relevant range

what is produced is sold

sales mix is known for multiple product analysis

selling prices and costs are assumed to be known with certainty
23. margin of safety
units sold or expected to be sold or revenue earned or expected to be earned above break even volume
24. operating leverage
use of fixed costs to extract higher peercentage changes in profits as sales activity changes
25. degree of operating leverage
total contribution margin / profit

higher = more risk

### Card Set Information

 Author: Calbrenar ID: 150238 Filename: 710_C16 Updated: 2012-04-26 04:38:55 Tags: MBA 710 Folders: Description: MBA 710 Show Answers:

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