Is the amount remaining from sales revenue after variable expenses have been deducted
Break even point
The level of sales at which profit is zero. (p. 190)
Cost-Volume-Profit(CVP)graph
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. (p. 192)
Contribution Margin Ratio(CM Ratio)
A ratio computed by dividing contribution margin by dollar sales. (p. 195)
Variable Expense Ratio
A ratio computed by dividing variable expenses by dollar sales. (p. 196)
Incremental Analysis
An analytical approach that focuses only on those costs and revenues that change as a result of a decision. (p. 198)
Target Profit Analysis
Estimating what sales volume is needed to achieve a specific target profit. (p. 202)
Margin of safety
The excess of budgeted or actual dollar sales over the break-even dollar sales. (p. 204)
Operating Leverage
A measure of how sensitive net operating income is to a given percentage change in dollar sales. (p. 207)
Degree of operating leverage
A measure, at a given level of sales, of how a percentage change in sales will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income. (p. 207)
Sales Mix
The relative proportions in which a company’s products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales. (p. 209)