BUS 371 CH 5 KEY TERMS

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BUS 371 CH 5 KEY TERMS
Jamie Plym
Flashcards by Jamie Plym, updated more than 1 year ago
Jamie Plym
Created by Jamie Plym over 1 year ago
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Break-even point The level of sales at which profit is zero.
Contribution margin ratio (CM ratio) A ratio computed by dividing contribution margin by sales.
Cost-volume-profit (CVP) graph 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.
Degree of operating leverage A measure, at a given level of sales, of how a percentage change in salesvolume will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income.
Incremental analysis An analytical approach that focuses only on those costs and revenues that change as a result of a decision.
Margin of safety The excess of budgeted or actual dollar sales over the break-even dollar sales.
Operating leverage A measure of how sensitive net operating income is to a given percentage change in unit sales.
Sales mix The relative proportions in which a company’s products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.
Target profit analysis Estimating the level of sales needed to achieve a desired target profit.
Variable expense ratio A ratio computed by dividing variable expenses by sales.
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