Chapter 3

Question 1

Study of the relationships among revenues, costs, and volume and their effect on profit.

Answer 1

cost–volume–profit (CVP) analysis

Question 2

Operating profit equals total revenue less total costs.

Answer 2

profit equation

Question 2

Difference between revenues per unit (price) and variable costs per unit.

Answer 2

unit contribution margin

Question 3

Difference between revenues and total variable costs.

Answer 3

total contribution margin

Question 4

Volume level at which profits equal zero

Answer 4

break-even point

Question 5

Contribution margin as a percentage of sales revenue.

Answer 5

contribution margin ratio

Question 6

Version of cost-volume–profit analysis using a single profit line.

Answer 6

profit–volume analysis

Question 7

Proportion of fixed and variable costs to total costs of an organization.

Answer 7

cost structure

Question 8

Extent to which an organization’s cost structure is made up of fixed costs. It is calculated as
contribution margin divided by operating profit.

Answer 8

operating leverage

Question 9

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

Answer 9

margin of safety

Question 10

The excess of projected or actual sales over the break-even volume expressed as a percentage of the actual volume.

Answer 10

margin of safety percentage