Exam 3 chapter 6
With regards to interpreation, what are the important areas that appear on a CVP graph?
Break-even point, loss area, and profit area
CM Ratio
CM/Sales
The profit graph is based on the following linear equation:
Profit = Unit CM x Q - Fixed Expenses
Break Even Sales
Total Fixed Expenses / Contribution Margin Ratio
Margin of Safety in Dollars
Total Sales - Break Even Sales
Break-even point is the level of sales at which ______
total revenue equals total costs
Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold
unit contribution margin
Variable expense ratio
variable expenses/sales
profit
(CM ratio × Sales) − Fixed Expenses
dollar sales to attain target profit
(target profit + fixed expenses) / CM ratio
What is usually plotted as a horizontal line on the CVP graph?
Fixes expenses
What is represented on the X axis of a cost-volume-profit (CVP) graph?
Unit Volume
Contribution margin equals ________
sales minus variable costs