An analytical approach that focuses only on those costs and revenues that change as a result of a decision.
Incremental analysis
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15
The excess of budgeted or actual dollar sales over the break-even dollar sales.
Margin of safety
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Estimating the level of sales needed to achieve a desired target profit.
Target profit analysis
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A measure, at a given level of sales, of how a percentage change in sales volume will affect profits. The ____ of _____ _____ is computed by dividing contribution margin by net operating income.
Degree of operating leverage
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banana
Go to last place!
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gold
Win 50 points!
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fairy
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baam
Lose 25 points!
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A graphical representation of the relationships between an organizationâs revenues, costs, and profits on the one hand and its sales volume on the other hand.
Cost-volume-profit (CVP) graph
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heart
Other team wins 25 points!
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seesaw
Swap points!
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rocket
Go to first place!
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thief
Give points!
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lifesaver
Give 10 points!
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gift
Win 15 points!
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gift
Win 20 points!
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thief
Give points!
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The relative proportions in which a companyâs products are sold. ____ ___ is computed by expressing the sales of each product as a percentage of total sales.
Sales mix
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15
A measure of how sensitive net operating income is to a given percentage change in unit sales.
Operating leverage
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A ratio computed by dividing variable expenses by sales.
Variable expense ratio
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A method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels.
High-low method
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15
The level of sales at which profit is zero.
Break-even point
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A ratio computed by dividing contribution margin by sales.