acct208 exam 1 (Ch 5)

profit =

(selling price per unit x quantity sold) - (variable expense per unit x quantity sold) - fixed expenses

net operating income =

(unit sales - unit sales to breakeven) x unit contribution margin

net operating income =

contribution margin - fixed costs

degree of operating leverage =

contribution margin / net operating income

when constructing a CVP graph, the vertical axis represents

dollars

total contribution margin =

fixed expenses + net operating income

unit sales to breakeven =

fixed expenses / units contribution margin

assumptions of CVP analysis

in multi product companies the sales mix is constant & costs are linear and can be accurately divided into variable and fixed elements

contribution margin =

sales - variable expenses

contribution margin format income statement in order

sales, variable expenses, contribution margin, fixed expenses, net operating income

high low or least squares regression analysis should only be done if a ____ depicts linear cost behavior

scattergraph plot

unit sales to attain the target profit

target profit + fixed expenses / CM per unit

margin of safety

the amount by which sales can drop before losses are incurred

degree of operating leverage

the measure of how a percentage change in sales affects profits at any given level of sales

sales mix

the relative proportions in which a company's products are sold

in a CVP graph, the horizontal axis represents

units