Acct. 7
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11 terms
Terms | Definitions |
|---|---|
 Breakeven point | the sales level at which operating income is zero: total revenues equals total expenses |
| contribution margin | sales revenue minus variable expenses |
| contribution margin per unit | the excess of the unit sales price over the variable cost per unit; also called unit contribution margin |
| 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 ratio | ratio of contribution margin to sales revenue |
| cost-volume-profit (CVP) analysis | expresses the relationships among costs, volume, and profit or loss |
| margin of safety | excess of expected sales over breakeven sales; drop in sales a company can absorb without incurring an operating loss |
| operating leverage | 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 |
| sales mix | the combination of products that make up total sales |
| sensitivity analysis | 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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