Topic_11_CVP_Analysis_Flashcards
(10 cards)
What is the contribution margin formula?
Contribution Margin = Sales – Variable Costs
What is the break-even formula (units)?
Fixed Costs ÷ Contribution Margin per unit
What is the formula for target income (units)?
(Fixed Costs + Target Income) ÷ CM per unit
What happens to fixed cost per unit as volume increases?
It decreases due to cost spreading.
What is operating leverage?
The degree to which a firm’s profits are affected by changes in sales due to fixed cost structure.
What’s a mixed cost?
A cost with both fixed and variable components.
How do you separate mixed costs?
Use scattergraph or high-low method.
When is high operating leverage risky?
When sales volume is low or uncertain.
What is sales mix?
The proportion of revenue from different products.
How can CVP analysis support planning?
By modeling “what-if” scenarios and guiding pricing or cost decisions.
