Chapter Seven Answers – Flashcards
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after tax net income
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an organizations net income after its income tax expense is subtracted
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before tax income
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an organizations income before its income tax expense is subtracted
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break even point
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the volume of activity at which an organizations revenues and expenses are equal. may be measured either in units or in sales dollars
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contribution income statement
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an income statement on which fixed and variable expenses are separated
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contribution margin ratio
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the unit contribution margin divided by the sales price per unit. also may be expressed in percentage from
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cost structure
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the relative proportions of an organizations fixed and variable costs
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cost volume profit analysis
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a study of the relationships between sales volume, expenses, revenue, and profit
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cost volume profit graph
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a graphical expression of the relationships between sales volume, expenses, revenue and profit
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operating leverage
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the extent to which an organization uses fixed costs in its cost structure. the greater the proportion of fixed costs, the greater the _____________
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operating leverage factor
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a measure of operating leverage at a particular sales volume. computed by dividing an organizations total contribution margin by its net income
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profit volume graph
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a graphical expression of the relationship between profit and sales volume
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safety margin
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difference between budgeted sales revenue and break even sales revenue
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sales mix
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relative proportion of sales of each of an organizations multiple products
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sensitivity analysis
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a technique for determining what would happen in a decision analysis if a key prediction or assumption proves to be wrong
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target net profit
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the profit level set as managements objective
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total contribution margin
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total sales revenue less total variable expenses
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unit contribution margin
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sales price minus the unit variable cost
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weighted average unit contribution margin
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average of a firms several products unit contribution margins, weighted by the relative sales proportion of each product
