AC 361 Chapter 5

The contribution margin equals sales minus:

all variable costs

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

contribution margin

The calculation of contribution margin (CM) ratio is:

contribution margin/sales

If total contribution margin is less than total fixed expenses, then a __________ will occur.

net loss

Which of the following statements is correct?

the higher the margin of safety, the lower the risk of incurring a loss

Profit= (selling price per unit x quantity sold) - ( __________ expense per unit x quantity sold) - __________ expense.

variable fixed

Variable expenses/Sales is the calculation for the __________ __________ ratio.

variable expense

The break-even point is the level at which the profit equals __________.

zero

What items are found above the contribution margin on a contribution format income statement?

- sales - variable expenses

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

- selling price - costs - volume

The break-even point calculation is affected by:

- selling price per unit - costs per units - sales mix

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.

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