Break-Even Analysis Terms and Definitions, Quizzes of Accounting

Download Break-Even Analysis Terms and Definitions and more Quizzes Accounting in PDF only on Docsity! TERM 1 break-even chart DEFINITION 1 a graph that depicts the relationships among revenues, variable costs, fixed costs, and profits (or losses) TERM 2 break-even point DEFINITION 2 the level of activity, in units or dollars, at which total revenues equal total costs TERM 3 contribution margin ratio DEFINITION 3 the proportion of each revenue dollar remaining after variable costs have been covered; computed as contribution margin divided by sales TERM 4 cost-volume-profit analysis DEFINITION 4 a procedure that examines changes in costs and volume levels and the resulting effects on net income (profits) TERM 5 degree of operating leverage DEFINITION 5 a factor that indicates how a percentage change in sales, from the existing or current level, will affect company profits; calculated as contribution margin divided by net income; equal to (1 / margin of safety percentage) TERM 6 incremental analysis DEFINITION 6 a process of evaluating changes that focuses only on the factors that differ from one course of action or decision to another TERM 7 margin of safety DEFINITION 7 the excess of the budgeted or actual sales of a company over its breakeven point; can be calculated in units or dollars or as a percentage; is equal to (1 degree of operating leverage) TERM 8 operating leverage DEFINITION 8 the proportionate relationship between a company's variable and fixed costs; reflects the cost structure TERM 9 profit-volume graph DEFINITION 9 a visual representation of the amount of profit or loss associated with each level of sales TERM 10 variable cost ratio DEFINITION 10 the proportion of each revenue dollar represented by variable costs; computed as variable costs divided by sales or as (1 - contribution margin ratio)