Chapter 6 learnsmart

the degree of operating leverage =

Contribution Margin / Net Operating Income

CVP is the acronym for __-__-__

Cost Volume Profit

using the contribution margin ratio, the impact on net income for a change in sales dollars is

change in sales dollars x contribution margin ratio

To calculate the degree of operating leverage, divide ----- ----- by net operating income

contribution margin

after reaching the break-even point, a company's net operating income will increase by the ---- ---- per unit

contribution margin

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

decrease

estimating the fixed and variable components of a mixed cost using the ---- approach involves a detailed analysis of what cost behavior should be

engineering

knowledge of previous sales is necessary when using incremental analysis to evaluate a change in profits

false

in a least-squares regression line, the intercept (a) of the line represents the ---- costs

fixed

in the equation y=a + bX, X represents the

level of activity

a measure of how sensitive net operating income is to a given percentage change in sales dollars is known as operating -----

leverage

the variable expense ratio is variable expense to

sales

when using the high low method, the change in cost divided by the change in units equals -----

the variable cost per unit

To prepare a CVP graph, lines must be drawn total revenue, ----, -----

total expense and total fixed expense

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

zero

the calculation of contribution margin ratio is

contribution/sales

the amount by which sales can drop before losses are incurred is the ---- of ----

margin, safety

when using the high-low method, the slope of the line equals the ---- costs

variable

In using the high-low method, the fixed cost is calculated

- after the variable cost per unit is calculated - using either the high or low level of activity

CVP analysis focuses on how profits are affected by:

- sales volume - mix of products sold - unit variable cost - total fixed costs - selling price

CVP analysis allows companies to easily identify the change in profit due to changes in:

- selling price - volume - costs

when a straight-line is a reasonable approximately for the relation between cost and activity ---- cost behavior occurs

linear

the contribution margin equals sales minus

all variable costs

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

decrease in the unit variable cost

when constructing a CVP graph, the vertical axis represents

dollars

High-low or least squares regression analysis should only be done if a(n) ________ depicts linear cost behavior.

scattergraph

to simplify CVP calculations, it is assumed that ----- will remain constant

selling price

the break-even point is reached when the contribution margin is equal to

total fixed expenses