Accounting 2 Chapter 5 Smartbook

CM Ratio

Contribution Margin / Sales

Cost-Volume-Profit Analysis

The study of the effects of changes in costs and volume on a company's profits.

Profit equals?

(PxQ - VxQ) - Fixed Expenses

Normal Costing

A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job.

Job Cost Sheet

A form that records the materials, labor, and manufacturing overhead costs charged to a job

CVP Analysis

A tool that is used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs.

Contribution Matgin..

Becomes profit after fixed expenses are covered

Contribution margin statement is ordinary used by?

Inside the company only

The vertical distance between the total revenue line and the total expense line on a CVP graph represents the total?

Profit or loss

When preparing a CVP graph, the horizontal axis represents?

Sales Volume

To simplify CVP calculations?

Selling price remains constant

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

Selling price, costs, and volume

CM Ratio is equal to 1-

Variable Expense Ratio