Cost Volume Profit Analysis

Question 1

What is the cost function

Answer 1

TC=Vx + F

Question 2

Unit Contribution Margin

Answer 2

Difference between revenues per unit and variable cost per unit

Question 3

Profit equation

Answer 3

Contribution margin - Fixed Costs

Question 4

Break-even in units

Answer 4

Fixed Costs/Unit Contribution Margin

Question 5

Break-Even Volume in Sales Dollars

Answer 5

Fixed Costs/Contribution Margin Ratio

Question 6

Contribution Margin Ratio

Answer 6

Unit Contribution Margin/Sales Price per Unit

Question 7

Target Volume in Units

Answer 7

(Fixed Costs + Target Profit)/Contribution Margin Per unit

Question 8

Target Volume in Sales Dollars

Answer 8

(Fixed Costs+Target Profit)/Contribution Margin Ratio

Question 9

Cost Structure

Answer 9

Proportion of an organization’s fixed and variable costs to its total costs

Question 10

Operating Leverage

Answer 10

Extent to which an organization’s cost structure is made up of fixed costs.

(contribution margin/profit)

The higher the firm’s fixed costs, the higher the break-even point. once the break-even point has been reached, however, profit increases at a high rate.

Companies with lower fixed costs have the ability to be more flexible to changes in market demands that do companies with higher fixed costs and better able to survive tough times.