Cost Volume Profit (CVP) Analysis: Understanding Contribution Margin and Break-even Point, Quizzes of Management Accounting

Download Cost Volume Profit (CVP) Analysis: Understanding Contribution Margin and Break-even Point and more Quizzes Management Accounting in PDF only on Docsity! TERM 1 CVP ANALYSIS DEFINITION 1 examines the behavior of total revenues, total costs, and operating income as changes occur in units sold, selling price, variable cost per unit, or fixed costs. TERM 2 Contribution Margin DEFINITION 2 total revenues- total variable costs indicates why operating income changes as the number of units sold changes. TERM 3 Contribution Margin Per Unit DEFINITION 3 difference between selling price and variable cost per unit. Total CM/Units CM= Unit CM x Units TERM 4 Contribution Margin Percentage DEFINITION 4 Unit CM/Selling Price Contribution margin per dollar of revenue TERM 5 Equation Method DEFINITION 5 Rev-VC-FC=OPY Rev= SP x Q TERM 6 CVP Assumptions DEFINITION 6 changes in revenues and costs result only from changes in Q. costs are only fixed or variable total revenues and total costs are linear SP, unit VC, total FC are known and constant TERM 7 FIXED COST EQUATION DEFINITION 7 Unit CM x Breakeven units= FC TERM 8 Breakeven Units DEFINITION 8 FC/Unit CM TERM 9 Breakeven Revenues DEFINITION 9 FC/CM% TERM 10 Target OPY DEFINITION 10 Q= (FC+ Target OPY)/Unit CM