Managerial Ch 05 - Cost Volume

Question 1

Break-even point

Answer 1

The level of sales at which profit is zero. (p. 186)

Question 2

Contribution margin ratio (CM ratio)

Answer 2

A ratio computed by dividing contribution margin by dollar sales. (p. 191)

Question 3

Cost-volume-profit (CVP) graph

Answer 3

A graphical representation of the relationships between an organization’s revenues, costs, and profits on the one hand and its sales volume on the other hand. (p. 188)

Question 4

Degree of operating leverage

Answer 4

A measure, at a given level of sales, of how a percentage change in sales will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income. (p. 202)

Question 5

Incremental analysis

Answer 5

An analytical approach that focuses only on those costs and revenues that change as a result of a decision. (p. 193)