The level of sales at which profit is zero.
Break-even point
A ratio computed by dividing contribution margin by sales.
Contribution margin ratio (CM ratio)
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.
Cost-volume-profit (CVP) graph
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
An analytical approach that focuses only on those costs and revenues that change as a result of a decision.
Incremental analysis
The excess of budgeted or actual dollar sales over the break-even dollar sales.
Margin of safety
A measure of how sensitive net operating income is to a given percentage change in unit sales.
Operating leverage
The relative proportions in which a company’s products are sold. ____ ___ is computed by expressing the sales of each product as a percentage of total sales.
Sales mix
Estimating the level of sales needed to achieve a desired target profit.
Target profit analysis
A ratio computed by dividing variable expenses by sales.
Variable expense ratio
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
