Term
| What does CVP analysis do? |
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Definition
| Examines the behavior of total revenues, total costs, and operating income with changes to units sold, selling price, & FC/VC |
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Term
| What are the 5 steps of CVP analysis? |
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Definition
1) Identify problems
2) Obtain information
3) Make predictions
4) Make decisions
5) Implement decisions |
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Term
| Whats the contribution margin per unit? How is it calculated? |
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Definition
How much revenue per sale is left after variable costs per unit
Selling Price - VC per unit |
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Term
| What's the contribution margin? How is it calculated? |
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Definition
How much total revenue is left after variable costs are taken out
# Units Sold x CM per unit
Total Revenues - Total Variable Costs |
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Term
| What is the contribution margin percentage? How is it calculated? |
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Definition
Percentage of revenues left after variable costs are taken out
CM per unit
selling price
Total Contribution Margin
Total Revenue |
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Term
| What's the margin of safety? |
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Definition
| The number of units sold after we reach the break even point. |
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Term
| How do you calculate operating income? |
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Definition
Revenues
(Variable costs)
(Fixed costs)
Operating Income |
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Term
| How are revenues calculated? |
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Definition
| Selling price x units sold |
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Term
| How do you calculate Variable costs? |
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Definition
| (Variable cost per unit)(# units sold) |
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Term
| How do you calculate operating income using contribution margin per unit? |
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Definition
| (CMperunit x # sold) - fixed costs |
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Term
| What is the breakeven point? |
|
Definition
|
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Term
| How do you calculate breakeven revenues? |
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Definition
Fixed Costs
Contribution margin % |
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Term
| How do you calculate breakeven number of units? |
|
Definition
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Term
| How do you calculate target operating income? |
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Definition
Target Net Income
1 - Tax Rate |
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Term
| How do you calculate Target Net Income? |
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Definition
| (Target OI) x (1 - Tax Rate) |
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Term
| What's another way to calculate target net income? |
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Definition
| (Target OI) - (Target OI x Taxrate) |
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Term
| Whats the difference between gross margin and contribution margin? |
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Definition
GM = Rev - CGS
CM = Rev - Variable Costs |
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Term
| How do you calculate the margin of safety percentage? |
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Definition
Margin of Safety in dollars
Actual Revenues |
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