Term
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Definition
| The cost stays constant at all levels within the relevant range |
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Term
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Definition
| Costs that are locked in due to a previous management decision |
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Term
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Definition
| Costs that are the result of annual management decisions |
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Term
| Moves inversely with changes in volume |
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Definition
| How does the fixed cost per unit activity move in relation to volume. |
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Term
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Definition
| The cost changes in direct proportion to the number of units produced within the relevant range |
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Term
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Definition
| Costs that change when the number of units produced changes but not in direct proportion to the number of units produced. |
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Term
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Definition
| Increases as volume increases because of the variable cost component. |
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Term
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Definition
| Decrease as volume increases because of the fixed cost component. |
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Term
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Definition
| The production level where we have observed that (1) Total fixed cost remain constant (2) Variable cost per unit remains constant. |
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Term
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Definition
| Fixed over a small range of activity but jump to a new fixed level with changes in volume |
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Term
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Definition
| The independent variable the company is in control of that will affect our dependent variable. |
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Term
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Definition
| Allows us to look at the relationship between costs, the number of units produced, and profit |
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Term
Sales Price
Volume
VC
FC
Profit / Loss |
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Definition
| Components of CVP Analysis |
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Term
1. The only factor that affects cost is a change in volume.
2. Managers classify all costs as fixed or variable (within relevant range)
3. Sales revenue is linear
4. Inventory levels do not change
5. The sales mix stays constant |
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Definition
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