CVP Single Product

Question 1

Break-even point

Answer 1

Level of sales where PROFIT = 0; Point where there is no Profit or Loss

Question 2

Contribution

Answer 2

Remaining amount available to cover FC and = in Profit

Question 3

Contribution margin

Answer 3

Contribution expressed as % of sales

Question 4

Margin of safety

Answer 4

Measure by how much sales can decrease before loss is made

Question 5

Margin of safety ratio

Answer 5

Margin of Safety expressed as % of total sales

Question 6

Operating leverage

Answer 6

Measure of how sensitive net profit is to % change in sales

Question 7

Break-even points: Units

Answer 7

FC / Contribution per unit

Question 8

Break-even points: Rand

Answer 8

FC / Contribution ratio

Question 9

Contribution formula

Answer 9

Sales - VC

Question 10

Contribution margin formula

Answer 10

Contribution / Sales

Question 11

Margin of safety formula

Answer 11

Total Sales - Breakeven Sales

Question 12

Margin of safety ratio formula

Answer 12

Margin of Safety / Total Sales

Question 13

Operating leverage formula

Answer 13

Contribution / Net Profit

Question 14

Degree of Operating leverage

Answer 14

5 -> NP grows 5 times faster than Sales
Ratio FC & VC