# Chap 6 Terms - Flashcards

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 Class: ACTG 212 - Fundamentals of Managerial Accounting Subject: Accounting University: Radford University Term: Fall 2009
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 Break-Even Point Level of sales where profits equal zero. Total sales = totale expenses. Contribution Margin Method Method of computing break even point wher FIXED EXPENSES /CONTRIBUTION MARGIN PER UNIT. Contribution Margin Ratio (CM) Ratio computed by dividing CONTRIBUTION MARGIN/DOLLAR SALES. Cost-volume-profit (CVP) Graph Graphical representation of the relationships between and organization's revenues, costs, and profits on the one hand and its sales volume on the other hand.
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 Degree of Operating Level Measure at given level of sales, of how a percentage change in sales wll affect profits. The degree of operating leverage is computed by dividing CM/NOI Equation Method Method of computing break even point that relies on the equation SALES=V EXPENSES + FIXED EXPENSES + PROFITS. Incremental Analysis An analytical approach that focuses only on those costs and revenues that change as a result of a decision. Margin of Safety The excess of budgeted (or actual) dollars sales over the break even dollar sales.
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 Operating Leverage A measure of how sensitive NOI is to a given % change in dollar sales. Computed by dividing the CM/NOI Sales Mix 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. Variable Expense Ratio Ratio computed by dividing V EXPENSE / DOLLAR SALES
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Break-Even PointLevel of sales where profits equal zero. Total sales = totale expenses.
Contribution Margin MethodMethod of computing break even point wher FIXED EXPENSES /CONTRIBUTION MARGIN PER UNIT.
Contribution Margin Ratio (CM)Ratio computed by dividing CONTRIBUTION MARGIN/DOLLAR SALES.
Cost-volume-profit (CVP) GraphGraphical representation of the relationships between and organization's revenues, costs, and profits on the one hand and its sales volume on the other hand.
Degree of Operating LevelMeasure at given level of sales, of how a percentage change in sales wll affect profits. The degree of operating leverage is computed by dividing CM/NOI
Equation MethodMethod of computing break even point that relies on the equation SALES=V EXPENSES + FIXED EXPENSES + PROFITS.
Incremental AnalysisAn analytical approach that focuses only on those costs and revenues that change as a result of a decision.
Margin of SafetyThe excess of budgeted (or actual) dollars sales over the break even dollar sales.
Operating LeverageA measure of how sensitive NOI is to a given % change in dollar sales. Computed by dividing the CM/NOI
Sales MixRelative 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.
Variable Expense RatioRatio computed by dividing V EXPENSE / DOLLAR SALES