bus 215 ch 5

which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs

cvp analysis

assuming the sales price remains constant, an increase in the variable cost per unit will ______ the contribution margin per unit

decrease

true or false: the higher the margin of safety, the lower the risk of incurring a loss

true

profit equals

(P x Q) - (V x Q) - field expenses

contribution margin is first used to cover _____ expenses. once the break-even point has been reached, contribution margin becomes______.

fixed profit

when the analysis of a change in profits only considers the costs and revenues that will change as result of the decision is being made using

incremental analysis

the variable expense ratio is the ratio of variable expense to

sales

which of the following items are found above the contribution margin on a contribution margin format income statement

sales and variable expenses

to simplify cvp calculations, which of the following is assumed to remain constant

selling price

variable expenses/sales is the calculation for the

variable expense ratio

the break-even point is the level of sales at which the profit equals

zero

a company has reached its break-even point when the contribution margin _____ fixed expenses.

equals

true or false: simple cvp analysis can be relied for changes in volume outside the relevant range

false

an income statement constructed under the ______ approach allows users to easily judge the impact on profits of changes in selling price, cost or volume

contribution margin

according to the cvp analysis model and assuming all else remains the same profits would be increased by a

decrease in the unit variable cost

once the break even point has been reached the sale of an additional unit will lead to an increase in the contribution margin that is ______ the increase in net operating income

equal to

once the break-even point has been reached, the sale of an additional unit will lead to an increase in contribution margin that is _____ the increase in net operating income

equal to

solving for the sales level needed to attain a target profit of $____ is the same process as solving for the sales level needed to break even

0

contribution margin ratio is equal to

contribution margin divided by sales

multiplying unit selling price times the number of units required to break even is one way to calculate

break even sales dollars

to calculate profit, multiply the _____ per unit by sales volume and subtract total fixed cost

contribution margin

the single point where the total revenue line crosses the total expense line of the cvp graph indicates

the break even point and the profit equaling zero

the profit graph allows users to easily identify

the profit at any given sales volume and the sales volume requires to reach the break even point

to prepare a cvp graph, the lines must be drawn representing total revenue

total expense and total fixed expense

the contribution margin statement is primarily used for

internal decision making