Managerial Accounting Chapter 7: Cost-Volume-Profit Analysis
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The sales level at which operating income is zero: Total revenues = Total expenses.
Sales revenue minus variable expenses.
Contribution Margin Income Statement
An income statement that groups costs by behavior rather than function; it can be used only by internal management.
Contribution Margin Per Unit
The excess of the unit sales price over the variable cost per unit; also called unit contribution margin.
Contribution Margin Ratio
Ratio of contribution margin to sales revenue.
Cost-Volume-Profit (CVP) Analysis
Expresses the relationships among costs, volume, and profit or loss.
The volume of sales at which a company would be indifferent between alternative cost structures because they would result in the same total cost.
Margin of Safety
Excess of expected sales over breakeven sales; the drop in sales a company can absorb without incurring an operating loss.
The relative amount of fixed and variable costs that make up a firm's total costs.
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.
The combination of products that make up total sales.
A "what-if" technique that asks what results will be if actual prices or costs change or if an underlying assumption changes.
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