Chapter 11: Cost Behavior and Decisions Using C-V-P Analysis

Question 1

The amount of sales at which total costs of the number of units sold equal total revenues; the point at which there is no profit or loss

Answer 1

Break-Even Point

Question 2

The difference between total sales and variable costs; the portion of sales revenue available to cover fixed costs and provide a profit

Answer 2

Contribution Margin

Question 3

The percentage of net sales revenue left after variable costs are deducted; the contribution margin divided by net sales revenue

Answer 3

Contribution Margin Ratio

Question 4

The way a cost is affected by changes in activity levels

Answer 4

Cost Behavior

Question 5

Techniques for determining how changes in revenues, costs, and level of activity affect the profitability of an organization

Answer 5

Cost-Volume-Profit Analysis

Question 6

Costs that remain constant in total, regardless of activity level, at least over a certain range of activity

Answer 6

Fixed Costs

Question 7

A method of segregating the fixed and variable components of a mixed cost by analyzing the costs at the highest and the lowest activity levels within a relevant range

Answer 7

High-Low Method

Question 8

A method of segregating the fixed and variable components of a mixed cost by plotting on total costs at several activity levels and drawing a regression line through the points

Answer 8

Method

Question 9

Costs that contain both variable and fixed costs components

Answer 9

Mixed Costs

Question 10

The extent to which fixed costs replace variable costs as part of a company’s cost structure; the higher the proportion of fixed costs to variable costs, the faster income increases or decreases with changes in sales volume

Answer 10

Operating Leverage

Question 11

The excess of the sales price of one unit over its variable costs

Answer 11

Per-unit Contribution Margin

Question 12

A graph that shows how profits vary with changes in volume

Answer 12

Profit Graph

Question 13

On a scattergraph, the straight line that most closely expresses the relationship between the variables

Answer 13

Regression Line

Question 14

The range of operating level, or volume of activity, over which the relationship between total costs (variable plus fixed) and activity level is approximately linear

Answer 14

Relevant Range

Question 15

A measure of operating performance; computed by dividing net income by total sales revenue. Similar to profit margin

Answer 15

Return on Sales Revenue

Question 16

The relative proportion of sales dollars or total units sold that is represented by each of a company’s products

Answer 16

Sales Mix

Question 17

A method of segregating the fixed and variable components of a mixed cost by plotting on total costs at several activity levels and drawing a regression line through the points

Answer 17

Scattergraph

Question 18

Costs that change in total in a stair-step fashion (in large amounts) with changes in volume of activity

Answer 18

Stepped Costs

Question 19

A profit level desired by management

Answer 19

Target Income

Question 20

The change in cost divided by the change in activity; the slope of the regression line

Answer 20

Variable Cost Rate

Question 21

Costs that change in total in direct proportion to changes in activity level

Answer 21

Variable Costs

Question 22

A method of segregating the fixed and variable components of a mixed cost by plotting on total costs at several activity levels and drawing a regression line through the points

Answer 22

Visual-Fit