SU10: CVP Analysis Flashcards
Marginal product
the incremental output obtained by adding one unit of a variable input factor
Profit Maximization
where marginal revenue = marginal cost
Pure competition rules
large number of buyers and sellers, homogonous product.
marginal revenue = average revenue = average price
UCM
Unit Sales Price - Unit Variable Costs
Breakeven point in units
Fixed Costs / UCM
CMR
UCM / Unit Selling Price
Breakeven point in dollars
Fixed Costs / CMR
Margin of Safety
Planned Sales - Breakeven Sales
Margin of Safety Ratio
Margin of Safety / Planned Sales
Target Income in Units
(fixed costs + target operating income) / UCM
Target Income in Units (after tax)
[fixed costs + target net income / (1-tax rate)] / UCM
Multi-product breakeven point (costs)
Total fixed costs / (weighted average selling price - weighted average variable cost)
Multi-product breakeven point
total fixed expenses / weighted average UCM
weighted average contribution margin ratio
weighted average UCM / weighted average unit selling price
multi-product breakeven point
total fixed costs / weighted average CMR
Monopolistic competition is characterized by
a relatively large group of sellers who produce differentiated products
List some assumptions of CVP analysis
Inventory levels do not change (production equals sales)
Total variable costs chane proportionally with volume, but unit variable costs do not (it costs the same to produce unit 3 as it does to produce unit 3,000)
Fixed costs remain constant over the relevant range
Sales mix does not change
Time value of money is ignored.
Monopolistic competition is characterized by a
Relatively large group of sellers who produce differentiated products
A firm should <> production so long as <> is less than <>
increase production so long as marginal cost is less than selling price
