Cost Behavior
This type of cost remains constant in total but decreases per unit as volume increases.
What is a fixed cost?
The point at which total revenue equals total costs.
What is the break-even point?
This is the formula for contribution margin per unit.
What is Sales Price per Unit - Variable Cost per Unit?
A one-time order at a reduced sales price that does not affect regular customers.
What is a special order?
This type of company benefits the most from CVP analysis due to high fixed costs.
What is a fast-food company?
This cost varies directly with changes in production volume.
What is a variable cost?
The formula for computing break-even sales in units.
What is fixed costs / contribution margin per unit?
If the selling price is $35 and variable costs are $21, this is the contribution margin per unit.
What is $14?
When deciding to make or buy a product, this type of cost is irrelevant.
What is a sunk cost?
CVP analysis assumes that costs and revenue behave in this manner.
What is linearly?
The equation used to determine total cost, combining fixed and variable costs.
What is Y=VX+FY=VX+F (Total Cost = Variable Cost per Unit × Volume + Fixed Cost)?
If fixed costs are $10,000 and the contribution margin per unit is $5, this is the break-even quantity.
What is 2,000 units?
This represents the percentage of each sales dollar remaining after variable expenses.
What is the contribution margin ratio?
The key question when evaluating a special order: Will the new price cover this cost?
What is incremental cost?
The additional amount a company earns beyond the break-even point is called this.
What is operating income?
A cost that has both fixed and variable components.
What is a mixed cost?
The formula for computing break-even sales in dollars.
What is fixed costs / contribution margin ratio?
The total contribution margin is calculated using this formula.
What is Total Sales−Total Variable Costs?
If outsourcing a product saves $500,000 in costs but increases other costs by $200,000, this is the net savings.
What is $300,000?
If sales increase but fixed costs remain unchanged, this is how net income is affected.
What is it increases?
This type of cost does not change with production levels and is often a sunk cost.
What is an unavoidable cost?
If a company sells multiple products, this method is used to determine the break-even point.
What is the weighted average contribution margin?
If total sales are $50,000 and the contribution margin ratio is 40%, this is the total contribution margin.
What is $20,000?
The term for deciding which products to produce when resources are limited.
What is product mix decision?
The contribution margin approach to CVP assumes that this cost behavior pattern is correct.
What is variable and fixed costs remain separate?