Managerial Accounting Chapter 5

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

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

Break-even point, loss area, and profit area

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

Fixed Expenses

The profit graph is based on the following linear equation:

Profit = Unit CM × Q - Fixed Expenses.

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

Sales, Costs, or Profits

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

Unit volume

A shift in the sales mix from high-margin items to low-margin items can cause total profit to ________.

decrease

The measure of how sensitive net operating income is to a given percentage change in volume sales is called _______.

operating leverage

Contribution margin equals ________.

sales minus variable cost