Exam 3 chapter 6

With regards to interpreation, what are the important areas that appear on a CVP graph?

Break-even point, loss area, and profit area

CM Ratio

CM/Sales

The profit graph is based on the following linear equation:

Profit = Unit CM x Q - Fixed Expenses

Break Even Sales

Total Fixed Expenses / Contribution Margin Ratio

Margin of Safety in Dollars

Total Sales - Break Even Sales

Break-even point is the level of sales at which ______

total revenue equals total costs

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold

unit contribution margin

Variable expense ratio

variable expenses/sales

profit

(CM ratio × Sales) − Fixed Expenses

dollar sales to attain target profit

(target profit + fixed expenses) / CM ratio

What is usually plotted as a horizontal line on the CVP graph?

Fixes expenses

What is represented on the X axis of a cost-volume-profit (CVP) graph?

Unit Volume

Contribution margin equals ________

sales minus variable costs