SU 8: CVP Analysis & Marginal Analysis Flashcards
Breakeven Point
The level of output at which total revenues equal total expenses
Breakeven Analysis
A tool for understanding the interaction of revenues with fixed and variable costs
Margin of Safety
The excess of budgeted sales over breakeven sales
Unit Contribution Margin
Unit selling price - Unit variable cost
Composite UCM (Multiple Products)
UCM for one product x (Sales in units/Total sales) + Same for other product
Breakeven point in units
Fixed costs/UCM
Contribution Margin Ratio (CMR)
UCM/Unit sales price
Breakeven point in dollars
Fixed costs/Contribution margin ratio (CMR)
Target Unit Volume (Operating Income)
Fixed costs + Target operating income/UCM
Operating Income
Sales - Variable costs - Fixed costs
Target Unit Volume (Net Income)
Fixed costs + [Target net income/(1.0 - tax rate)]/ UCM
Explicit Costs
Those that represent actual outlays of cash, the allocation of outlays of cash, or commitments to pay cash
Implicit Costs
Opportunity costs, the maximum benefit forgone by using a scarce resource for a given purpose and not the next-best alternative
Marginal Revenue
The additional revenue produced by generating one additional unit of output
Marginal Cost
The additional cost incurred by generating one additional unit of output
