Acct 526 - UL Lafayette - Final Exam Set
1. Cost Volume Profit (CVP) Analysis: How changes in costs, sales volume, and price affect a company's profit.
2. Break-Even Point: The point where total revenue equals total cost
3. Unit Contribution Margin: Price - Unit Variable Cost
Unit CM Ratio:
Unit Contribution Margin / Price
4. Contribution Margin: Sales - Variable Cost
5. Operating Income: Sales - Total Expenses
Expanded:
Sales - Total Variable Costs - Total Fixed Costs
6. Break-Even Units: Total Fixed Cost / (Price - Variable Cost per Unit)
7. Variable Cost Ratio: Variable Cost Per Unit / Price
Can also be as total:
Total Variable Cost / Price
8. Contribution Margin Ratio: Total Contribution Margin / Sales
Or by unit:
Unit Contribution Margin / Price
9. Break-Even Sales: Total Fixed Costs / Contribution Margin Ratio
And CM Ratio:
Total Contribution Margin / Sales
10. Target Income
AKA Point in Sales Equation: (Total Fixed Cost + Target Income) / Contribution Margin Ratio
(Target Income / Unit Contribution Margin) + Break-Even Volume 11. Units for Income:
12. Change in Operating Income: Unit Contribution Margin * Change in Units Sold
13. Sales Dollars to Earn Target Income: (Total Fixed Cost + Target Income) /
Contribution Margin Ratio
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, Acct 526 - UL Lafayette - Final Exam Set
14. Assumptions of Cost-Volume-Profit Analysis: 1) There are identifiable linear revenue and linear cost functions that
remain constant over the relevant range.
2) Selling prices and costs are known with certainty.
3) Units produced are sold—there are no finished goods inventories.
4) Sales mix is known with certainty for multiple-product break-even settings
15. Margin of Safety in Sales: Sales - Break Even Sales
AKA Budgeted Sales - Break Even Sales
16. Margin of Safety in Units: Budgeted Units - Break Even Units
17. Degree of Operating Leverage: Total Contribution Margin / Operating Income 18. Percentage Change in Profits:
Degree of Operating Leverage * Percent
Change in Sales
19. Sensitivity Analysis: A "What-if" technique used to see the what impact a change in an
underlying variable has on the answer.
20. Decision-Making Model: Step 1. Recognize and define the problem.
Step 2.
Identify alternatives as possible solutions to the problem. Eliminate alternatives that clearly are not feasible.
Step 3.
Identify the costs and benefits associated with each feasible alternative. Classify costs and benefits as relevant or irrelevant, and
eliminate irrelevant ones from consideration.
Step 4.
Estimate the relevant costs and benefits for each feasible alternative.
Step 5.
Assess qualitative factors.
Step 6.
Make the decision by selecting the alternative with the greatest overall net benefit.
21. Total Variable Cost: DM + DL + Variable Overhead
22. Relevant Costs (and revenues): Possess two characteristics:
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1. Cost Volume Profit (CVP) Analysis: How changes in costs, sales volume, and price affect a company's profit.
2. Break-Even Point: The point where total revenue equals total cost
3. Unit Contribution Margin: Price - Unit Variable Cost
Unit CM Ratio:
Unit Contribution Margin / Price
4. Contribution Margin: Sales - Variable Cost
5. Operating Income: Sales - Total Expenses
Expanded:
Sales - Total Variable Costs - Total Fixed Costs
6. Break-Even Units: Total Fixed Cost / (Price - Variable Cost per Unit)
7. Variable Cost Ratio: Variable Cost Per Unit / Price
Can also be as total:
Total Variable Cost / Price
8. Contribution Margin Ratio: Total Contribution Margin / Sales
Or by unit:
Unit Contribution Margin / Price
9. Break-Even Sales: Total Fixed Costs / Contribution Margin Ratio
And CM Ratio:
Total Contribution Margin / Sales
10. Target Income
AKA Point in Sales Equation: (Total Fixed Cost + Target Income) / Contribution Margin Ratio
(Target Income / Unit Contribution Margin) + Break-Even Volume 11. Units for Income:
12. Change in Operating Income: Unit Contribution Margin * Change in Units Sold
13. Sales Dollars to Earn Target Income: (Total Fixed Cost + Target Income) /
Contribution Margin Ratio
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, Acct 526 - UL Lafayette - Final Exam Set
14. Assumptions of Cost-Volume-Profit Analysis: 1) There are identifiable linear revenue and linear cost functions that
remain constant over the relevant range.
2) Selling prices and costs are known with certainty.
3) Units produced are sold—there are no finished goods inventories.
4) Sales mix is known with certainty for multiple-product break-even settings
15. Margin of Safety in Sales: Sales - Break Even Sales
AKA Budgeted Sales - Break Even Sales
16. Margin of Safety in Units: Budgeted Units - Break Even Units
17. Degree of Operating Leverage: Total Contribution Margin / Operating Income 18. Percentage Change in Profits:
Degree of Operating Leverage * Percent
Change in Sales
19. Sensitivity Analysis: A "What-if" technique used to see the what impact a change in an
underlying variable has on the answer.
20. Decision-Making Model: Step 1. Recognize and define the problem.
Step 2.
Identify alternatives as possible solutions to the problem. Eliminate alternatives that clearly are not feasible.
Step 3.
Identify the costs and benefits associated with each feasible alternative. Classify costs and benefits as relevant or irrelevant, and
eliminate irrelevant ones from consideration.
Step 4.
Estimate the relevant costs and benefits for each feasible alternative.
Step 5.
Assess qualitative factors.
Step 6.
Make the decision by selecting the alternative with the greatest overall net benefit.
21. Total Variable Cost: DM + DL + Variable Overhead
22. Relevant Costs (and revenues): Possess two characteristics:
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