Understanding the Relationship between Sales, Profits, and Costs in CVP Analysis, Quizzes of Financial Accounting

Download Understanding the Relationship between Sales, Profits, and Costs in CVP Analysis and more Quizzes Financial Accounting in PDF only on Docsity! TERM 1 Cost Volume Profit Analysis DEFINITION 1 A tool that focuses on the relationship between a company profits and (1) the prices of products or services, (2) the volume of products or services, (3) the per unit variable cost, (4) the total fixed cost, and (5) the mix of products or sevices produced. TERM 2 Gross Profit DEFINITION 2 The difference between sales and cost of goods sold TERM 3 Contribution Margin DEFINITION 3 Sales less variable costs TERM 4 Net operating income DEFINITION 4 Contribution margin less fixed expenses TERM 5 Contribution margin per unit DEFINITION 5 The sales price per unit of product less all variable costs to produce and sell the unit of product; used to calculate teh change in cm resulting froma change in unit sales TERM 6 Contribution margin ration DEFINITION 6 The contribution margin divided by sales; used to calculate teh change in contribution margin resulting from a dollaer change in sales TERM 7 Break even point DEFINITION 7 The level of sales at which contribution margin just covers fixed costs and net income is equal to zero TERM 8 Equation of Break-even (unit) DEFINITION 8 Fixed costs / contribution margin per unit TERM 9 Break even ($) DEFINITION 9 Fixed costs/ Contribution margin ratio TERM 10 Equation method for break even DEFINITION 10 Profits = (Sales Variable expenses) Fixed expenses Sales = Variable expenses + Fixed expenses + Profits