Chapter 24 Flashcards
Output level at which sales equal fixed plus variable costs; where income equals zero.
Break-even point
Generic unit which summarizes the sales mix and contribution margins of each product; used in multi-product break-even analysis.
Composite unit
Amount that the sale of one unit contributes toward recovering fixed costs and earning profit; defined as sales price per unit minus variable costs per unit.
Contribution margin per unit
Product’s contribution margin divided by its sale price.
Contribution margin ratio
Planning method that includes predicting the volume of activity, the costs incurred, sales earned, and profits received.
Cost-volume-profit (CVP) analysis
Graphic representation of cost-volume-profit relations.
Cost-volume-profit (CVP) chart
Cost that changes with volume but not at a constant rate.
Curvilinear cost
Cost that does not change in total with changes in the volume of activity.
Fixed cost
Procedure that yields an estimated line of cost behavior by using the costs associated with the highest and lowest sales volume.
High-low method
Statistical method for deriving an estimated line of cost behavior that is more precise than the high-low method and the scatter diagram.
Least-squares regression
Excess of expected sales over the level of break-even sales.
Margin of safety
Cost that includes both fixed and variable costs.
Mixed cost
Company’s normal operating range; excludes extremely high and low volumes not likely to occur.
Relevant range of operations
Ratio of sales volumes for the various products sold by a company.
Sales mix
Graph used to display data about past cost behavior and sales as points on a diagram.
Scatter diagram
