Chapter 6 Learnsmart Acc 2033

How much contribution margin is generated per dollar of sales revenue is the.....

contribution margin ratio

When a company increases the selling price of a product with no change in variable cost per unit or total fixed cost, the breakeven point for that product will ________.

decrease

Setting two profit equations so that they yield the same profit allows managers to calculate the

indifference point

The breakeven point is the level of sales at which the profit equals _____________.

zero

The goal of the breakeven analysis is to find the level of sales where profit is equal to ___________.

zero

The breakeven point can be affected by:

1. Product mix 2. Sales mix 3. Total fixed cost

CVP analysis can be useful in deciding:

1. What price to charge for goods and services. 2. What marketing strategy to use. 3. Which services and products to offer. 4. What cost structure to implement.

CVP

1. allows managers to see how changing one variable can impact another 2. used to make many different decisions 3. "what-if" analysis

The weighted average unit contribution margin:

1. is based on the relative % of each unit sold 2. assumes the % of each product sold is constant 3. used instead of the single product contribution margin in multiproduct breakeven analysis.

NOT a method used for basic CVP analysis

Breakeven analysis

Can be used to easily calculate the change is profit resulting from a change in sales price, sales volume, variable costs, and fixed costs.

CVP analysis (cost-volume-profit)

Covers fixed cost and profit

Contribution margin

The Margin of Safety percentage is

Margin of Safety in dollars divided by the total budgeted or actual sales in dollars.

Difference between the breakeven analysis and target profit is the

amount that profit is set to.

Multiproduct target profit analysis is

calculated the same way as a single product analysis and depends on the sales mix.

Degree of operating leverage equals

contribution margin divided by net income

Decisions about whether to used fixed or variable costs to run a business impact a company's ___________.

operating leverage

Sales volume needed to achieve target profit=

target volume (sales dollars) - fixed costs + target profit / contribution margin ratio

Margin of Safety

the excess of budgeted or actual dollar sales over the break-even dollar sales

To prepare a CVP graph, lines must be drawn representing total revenue and ______.

total cost

When constructing a CVP graph, the place where the total cost line intercepts the y-axis represents ________________.

total fixed costs.

The weighted average contribution margin ratio is calculated using

total sales mix

The amount that each unit sold contributes to fixed costs and profit is.......

unit contribution margin

When preparing a CVP graph, the slope of the total line represents

variable cost per unit