chapter 8 Flashcards
revenues
inflows of assets received in exchange for products provided to customers.
revenue driver
a factor that affects revenues (units of output sold, selling prices, levels of marketing costs, etc.)
cost
a resource sacrificed or forgone to achieve a specific objective.
cost driver
any factor that affects cost.
cost-volume-profit (CVP) analysis
examines the behaviour of total revenues, total costs, and operating profit as changes occur in the output level, selling price, or fixed costs. It is representation of a special case, where a single revenue driver and a single cost driver are used.
operating profit
total revenues from operations minus total costs from operations (excluding income taxes).
net profit
operating profit plus non-operating revenues minus non-operating costs minus income taxes.
breakeven point
that quantity of output where total revenues and total costs are equal, so, where operating profit is zero.
contribution income statement
groups line items by cost behaviour pattern to highlight the contribution margin.
PV graph
shows the impact on operating profit of changes in the output level.
sensitivity analysis
a what-if technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes.
margin of safety
excess of budgeted revenues over the breakeven revenues.
uncertainty
possibility that an actual amount will deviate from an expected amount.
operating leverage
describes the effects that fixed costs have on changes in operating profit as changes occur in units sold and hence in contribution margin.
revenue mix/sales mix
the relative combination of quantities of products or services that constitutes total revenues.
