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breakeven point
Output level at which sales equal fixed plus variable costs; where income equals zero

Composite unit
Generic unit consisting of a specific number of units of each product; unit comprised in proportion to the expected sales mix of its products

Contribution margin per unit
Amount that the sale of one unit contributes toward recovering

Contribution margin ratio
Product’s contribution margin divided by its sale price

Costvolumeprofit (CVP) analysis
Planning method that includes predicting the volume of activity, the cost incurred, sales earned, and profits received

Costvolumeprofit (CVP) chart
Pg. 764

Curvilinear cost
Cost that changes with volume but not at a constant rate

Degree of operating leverage (DOL)
Ratio of contribution margin divided by pretax income; used to assess the effect on income of changes in sales

Estimated line of cost behavior
Line drawn on a graph to visually fit the relation between cost and sales

Highlow method
Procedure that yields an estimated line of cost behavior by graphically connecting costs associated with the highest and lowest sales volume

Leastsquares regression
Statistical method for deriving an estimated line of cost behavior that is more precise than the highlow method and the scatter diagram

Margin of safety
Excess of expected sales over the level of breakeven sales

Mixed cost
Cost that behaves like a combination of fixed and variable costs

Operating leverage
Extend, or relative size, of fixed costs in the total cost structure

Relevant range of operations
Company’s normal operating range; excludes extremely high and low volumes not likely to occur

Sales mix
Ratio of sales volumes for the various products sold by a company

Scatter diagram
Graph used to display data about past cost behavior and sales as points on a diagram

Stepwise cost
Cost that remains fixed over limited ranges of volumes but changes by a lump sum when volume changes occur outside these limited ranges

Weightedaverage contribution margin
For multiproduct firms, the sum of each product’s unit of contribution margin multiplied by that product’s sales mix percentage

