acct ch18

  1. break-even point
    Output level at which sales equal fixed plus variable costs; where income equals zero
  2. 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
  3. Contribution margin per unit
    Amount that the sale of one unit contributes toward recovering
  4. Contribution margin ratio
    Product’s contribution margin divided by its sale price
  5. Cost-volume-profit (CVP) analysis
    Planning method that includes predicting the volume of activity, the cost incurred, sales earned, and profits received
  6. Cost-volume-profit (CVP) chart
    Pg. 764
  7. Curvilinear cost
    Cost that changes with volume but not at a constant rate
  8. Degree of operating leverage (DOL)
    Ratio of contribution margin divided by pretax income; used to assess the effect on income of changes in sales
  9. Estimated line of cost behavior
    Line drawn on a graph to visually fit the relation between cost and sales
  10. High-low method
    Procedure that yields an estimated line of cost behavior by graphically connecting costs associated with the highest and lowest sales volume
  11. 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
  12. Margin of safety
    Excess of expected sales over the level of break-even sales
  13. Mixed cost
    Cost that behaves like a combination of fixed and variable costs
  14. Operating leverage
    Extend, or relative size, of fixed costs in the total cost structure
  15. Relevant range of operations
    Company’s normal operating range; excludes extremely high and low volumes not likely to occur
  16. Sales mix
    Ratio of sales volumes for the various products sold by a company
  17. Scatter diagram
    Graph used to display data about past cost behavior and sales as points on a diagram
  18. 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
  19. 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
Card Set
acct ch18
acct ch18