Managerial Accounting Chapter 7: Cost-Volume-Profit Analysis

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Managerial Accounting Chapter 7: Cost-Volume-Profit Analysis
2014-10-17 18:19:18

Chapter 7
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  1. Breakeven Point
    The sales level at which operating income is zero: Total revenues = Total expenses.
  2. Contribution Margin
    Sales revenue minus variable expenses.
  3. Contribution Margin Income Statement
    An income statement that groups costs by behavior rather than function; it can be used only by internal management.
  4. Contribution Margin Per Unit
    The excess of the unit sales price over the variable cost per unit; also called unit contribution margin.
  5. Contribution Margin Ratio
    Ratio of contribution margin to sales revenue.
  6. Cost-Volume-Profit (CVP) Analysis
    Expresses the relationships among costs, volume, and profit or loss.
  7. Indifference Point
    The volume of sales at which a company would be indifferent between alternative cost structures because they would result in the same total cost.
  8. Margin of Safety
    Excess of expected sales over breakeven sales; the drop in sales a company can absorb without incurring an operating loss.
  9. Operating Leverage
    The relative amount of fixed and variable costs that make up a firm's total costs.
  10. Operating Leverage Factor
    At a given level of sales, the contribution margin divided by operating income; the operating leverage factor indicates the percentage change in operating income that will occur from a 1% change in sales volume.
  11. Sales Mix
    The combination of products that make up total sales.
  12. Sensitivity Analysis
    A "what-if" technique that asks what results will be if actual prices or costs change or if an underlying assumption changes.