# acct ch18

 break-even point Output level at which sales equal fixed plus variable costs; where income equals zero Composite unit Generic unit consisting of a specific number of units of each product; unit comprised in proportion to the expected sales mix of its products Contribution margin per unit Amount that the sale of one unit contributes toward recovering Contribution margin ratio Product’s contribution margin divided by its sale price Cost-volume-profit (CVP) analysis Planning method that includes predicting the volume of activity, the cost incurred, sales earned, and profits received Cost-volume-profit (CVP) chart Pg. 764 Curvilinear cost Cost that changes with volume but not at a constant rate Degree of operating leverage (DOL) Ratio of contribution margin divided by pretax income; used to assess the effect on income of changes in sales Estimated line of cost behavior Line drawn on a graph to visually fit the relation between cost and sales High-low method Procedure that yields an estimated line of cost behavior by graphically connecting costs associated with the highest and lowest sales volume Least-squares regression Statistical method for deriving an estimated line of cost behavior that is more precise than the high-low method and the scatter diagram Margin of safety Excess of expected sales over the level of break-even sales Mixed cost Cost that behaves like a combination of fixed and variable costs Operating leverage Extend, or relative size, of fixed costs in the total cost structure Relevant range of operations Company’s normal operating range; excludes extremely high and low volumes not likely to occur Sales mix Ratio of sales volumes for the various products sold by a company Scatter diagram Graph used to display data about past cost behavior and sales as points on a diagram Step-wise cost Cost that remains fixed over limited ranges of volumes but changes by a lump sum when volume changes occur outside these limited ranges Weighted-average contribution margin For multi-product firms, the sum of each product’s unit of contribution margin multiplied by that product’s sales mix percentage AuthorAnonymous ID45186 Card Setacct ch18 Descriptionacct ch18 Updated2010-10-26T20:47:02Z Show Answers