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