cost chapter 5

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

$ sales to break even

Fixed Expenses / CM Ratio

unit sales to break even

Fixed Expenses / Unit CM

unit sales to attain target profit

(Target Profit + Fixed Expenses) / Unit CM

3 ways to get profit equation

(sales-variable expenses)-fixed expenses OR (unit CMxquantity)-fixed expenses OR (CMratioxsales)-fixed expenses

%change in net operating income...

=degree of operating leverage X %change in sales

change in CM

CM ratio x change in sales

CM Ratio

CM/Sales

Degree of Operating Leverage

Contribution Margin / Net Operating Income

CM per unit is...

Price per unit - VC per unit