Cost-Volume-Profit Analysis

Flashcards covering the key terms and concepts from the lecture on Cost-Volume-Profit Analysis.

Cost-Volume-Profit (CVP) Analysis

A managerial accounting method used to understand the relationship between a company's costs, sales volume, and profit.

Contribution Margin (CM)

The amount remaining from sales revenue after variable expenses have been deducted.

Break-even Point

The sales level at which total revenues equal total costs, resulting in zero profit.

Fixed Costs

Costs that do not vary with the level of production or sales.

Variable Costs

Costs that vary directly with the level of production or sales.

Operating Leverage

A measure of how sensitive net operating income is to percentage changes in sales volume.

Sales Mix

The relative percentage of each product sold in relation to total sales.

Target Operating Income

The desired income a company aims to achieve after covering all costs.

Margin of Safety

The excess of actual or budgeted sales over the break-even volume of sales.

Contribution Income Statement

An income statement that emphasizes the contribution margin and is useful for assessing the impact of changes in sales.