Term
contribution margin ratio
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Definition
unit contribution margin
sales price per unit |
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Term
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Definition
| sales price per unit-variable cost per unit |
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Term
| what does the unit contribution margin mean? |
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Definition
| tells managers how much revenue is left after variable cost |
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Term
| what does the contribution margin ratio mean? |
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Definition
| percentage of sales dollars available for covering fixed costs and generating profit |
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Term
| what does the break even point mean? |
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Definition
sales level when operating income is zero. above break even is profit, below is loss
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Term
| break even sales in units |
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Definition
fixed costs
unit contribution margin |
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Term
| break even sales in dollars |
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Definition
fixed cost
contribution margin ratio |
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Term
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Definition
sales needed in units= fixed costs+ operating income
unit contribution margin |
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Term
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Definition
sales needed in dollars= fixed costs+ operating income
contribution margin ratio |
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Term
| what does margin of safety mean? |
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Definition
| drop in sales before the company incurs a loss |
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Term
| margin of safety in units |
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Definition
| expected sales in units - breakeven sales in units |
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Term
| margin of safety in dollars |
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Definition
expected sales in dollars- break even sales in dollars
or
margin of safety in units * sales price per unit |
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Term
| margin of safety as a % of sales |
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Definition
margin of safety in units
expected sales |
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Term
| what does operating leverage mean? |
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Definition
relative amount of fixed and variable costs that make up total costs
shows how responsive a companys operating income is to changes in volume |
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Term
| what does a high operating leverage mean? |
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Definition
high levels of fixed costs
low levels of variable costs
higher contribution margin
higher risk/ higher reward
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Term
| operating leverage factor |
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Definition
contribution margin
operating income
$$
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