Module 3 - Contribution Flashcards
1
Q
Contribution
A
Contribution = sales - variable costs
2
Q
What does the total contribution show
A
The effect of profit of selling one extra unit
3
Q
CVP analysis assumptions
A
- variable cost per unit is constant
- total variable costs increase and decrease with sales volume
- total fixed costs do not change
- average selling price per unit is constant
- total sales revenue increases and decreases with same volume
4
Q
C/S ratio
A
Contribution per unit / sales price per unit
5
Q
Break even units
A
Fixed costs / contribution per unit
6
Q
Break even revenue
A
Fixed costs / CS ratio
7
Q
Break even price
A
(available profit + current cost) / total usage
8
Q
Margin of safety in units
A
Margin of safety = units sold - break even units
9
Q
Margin of safety in pounds
A
Sales revenue - break even revenue
