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