Cost Volume Profit Analysis Flashcards
CM is the…
amount available to cover fixed costs and give profit
Contribution margin =
sales revenue - all variable costs
contribution margin is the..
percent of every sales $ that is available for profit once fixed costs are covered
break even occurs when…
profit = 0, which occurs when CM is equal to fixed costs
break even can only occur if CM is…
equal to fixed costs
operating levergae is…
used to estimate how much profits will change when sales $ change
sales mix is…
the % of total sales for each product
sales mix is important when…
a company has more than one product
a change in sales mix can change…
the total profit
different product, but same company, have _______ CMS
different
lower sales with ____ CM can reduce total company profits
high
higher sales with _____ CM can reduce total company profit
low
contribution margin is the amoutn available to…
cover fixed costs
once fixed costs are covered, CM goes into…
profit
contribution margin per unit is the amount…
operation income increases when one more until is sold or the amount that decreases when one less unit is sold
contribution margin ratio is..
the amount (in cents) per sales dollar that is added to operation income when sales dollars increase
cost accountants job is to…
project changes and communicate to management
break even occurs when…
total contribution margin = total fixed costs
what is the operating income at break even?
0
operating leverage estimates…
how much OI will change as total sales dollars change
a high leverage factor means ____ fixed costs
higher
a high leverage indicates…
fast profit growth as sales grow and a higher risk of losing if economic downturn
a low leverage means ____ fixed costs
lower
a low leverage indicates…
slower profit growth, less of a risk of losing profit
the company’s WA CM per until will be lower when…
a company a higher % of lower contribution margin units than planned
when a company sells a higher % of lower contribution margin units than planned, the WA CM per unit will be…
lower
that situation would require…
more total units to be sold to achieve planned operating profits
