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Description
Flashcards by Jamie Plym, updated more than 1 year ago
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Created by Jamie Plym
about 3 years ago
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| Question | Answer |
| Break-even point | The level of sales at which profit is zero. |
| Contribution margin ratio (CM ratio) | A ratio computed by dividing contribution margin by sales. |
| Cost-volume-profit (CVP) graph | A graphical representation of the relationships between an organization’s revenues, costs, and profits on the one hand and its sales volume on the other hand. |
| Degree of operating leverage | A measure, at a given level of sales, of how a percentage change in salesvolume will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income. |
| Incremental analysis | An analytical approach that focuses only on those costs and revenues that change as a result of a decision. |
| Margin of safety | The excess of budgeted or actual dollar sales over the break-even dollar sales. |
| Operating leverage | A measure of how sensitive net operating income is to a given percentage change in unit sales. |
| Sales mix | The relative proportions in which a company’s products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales. |
| Target profit analysis | Estimating the level of sales needed to achieve a desired target profit. |
| Variable expense ratio | A ratio computed by dividing variable expenses by sales. |
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