CVP Analysis Flashcards
1
Q
Inherent Assumptions in CVP Analysis
Selling prices and market conditions
Time value of money
What things are constant
A
- selling prices & market conditions remain unchanged
- time value of money is ignored
- sales mix and technology are constant
- production = sales
2
Q
Explain
Margin of Safety
A
- amount of sales or number of units
- by which actual / budgeted sales my be decreased without resulting into a loss
3
Q
Explain
Operating Leverage
A
- extent to which a company uses fixed costs
- How sensitive the profit is to sales volume increase and decreases
