23505725
Description
Flashcards by Sophia Lynch, updated more than 1 year ago
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Created by Sophia Lynch
over 4 years ago
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| Question | Answer |
| At the breakeven point how much profit do we make? | 0 profit. |
| Sales = what at breakeven? | Sales = All Costs at breakeven |
| CM = what at breakeven? | CM = FC at breakeven Contribution Margin = Fixed Costs |
| All Costs = ... | Total FC + Total VC |
| What is the breakeven point? | How many sales we need to generate to cover our costs. |
| What is breakeven in units? | FC/UCM Fixed Costs/Unit Contribution Margin |
| UCM = | SP - VC/Unit |
| What is breakeven in $? | (FC/UCM) x SP |
| What is breakeven + desired level of profit in units? | (FC + Profit)/UCM |
| What is breakeven + desired level of profit in $? | (FC + Profit/UCM) x SP |
| Whether it is a manufacturing cost or not... | STILL INCLUDE it in CVP analysis. |
| Always round up for units in what? | Break-even |
| What is operating leverage? | The mix of FC & VC within the cost structure. |
| Having higher fixed costs means... | There is a higher operating leverage hence there is more risk within the cost structure. |
| Why is a high operating leverage risky? | Because a higher FC results in a higher CM hence you need to sell more product to ensure you reach BE + profit. |
| What is a margin of safety? | The excess above breakeven based on current operations. |
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