# Exam II Accounting 2

Discipline: Accounting

Paper Format: APA

Pages: 1 Words: 275

Question

Accounting/Managerial Accounting

Cost-Volume profit analysis
Is a decision making tool that focuses on the relationship among the volume and mix of units sold, prices, and variable costs, fixed costs, and profit.

Assumptions of cost volume profit analysis

CVP analysis can be useful in deciding
• can be used form”what if” analysis
• allows managers to see how changing one variable can impact another
• can be used to make many different decisions

Basic CVP analysis method
• Profit Equation Method
• unit contribution margin method
• contribution margin ratio method

Break even analysis
Solving for the sales level needed to achieve a profit of zero is break even analysis

Contribution Margin
• The contribution margin is the difference between sales revenue and variable cost or the amount of profit available to cover fixed cost and profit.
• Contribution margin equals sales minus ALL variable costs.
• cover fixed cost and profit

How net income can be increased

Cost structure
Cost structure refers to how a company uses fixed and variable cost in an organization

Operating Leverage
Decisions about whether to use fixed or variable cost to run a business impact of companies operating leverage

sales Mix
When preparing a multi product break even analysis the assumption is ordinarily made that the sales mix or not change

Units sold
The weighted average unit contribution margin is the average unit contribution margin of multiple products waited according to units sold

Cost-Volume profit analysis
Is a decision making tool that focuses on the relationship among the volume and mix of units sold, prices, and variable costs, fixed costs, and profit.

Assumptions of cost volume profit analysis

CVP analysis can be useful in deciding
• can be used form”what if” analysis
• allows managers to see how changing one variable can impact another
• can be used to make many different decisions

Basic CVP analysis method
• Profit Equation Method
• unit contribution margin method
• contribution margin ratio method

Break even analysis
Solving for the sales level needed to achieve a profit of zero is break even analysis

Contribution Margin
• The contribution margin is the difference between sales revenue and variable cost or the amount of profit available to cover fixed cost and profit.

• Contribution margin equals sales minus ALL variable costs.
• cover fixed cost and profit

How net income can be increased

Cost structure
Cost structure refers to how a company uses fixed and variable cost in an organization

Operating Leverage
Decisions about whether to use fixed or variable cost to run a business impact of companies operating leverage

sales Mix
When preparing a multi product break even analysis the assumption is ordinarily made that the sales mix or not change

Units sold
The weighted average unit contribution margin is the average unit contribution margin of multiple products waited according to units sold

Weighted average contribution margin ratio Reflects the contribution margin ratio of two products weighted according to the related the percentage of total sales revenue.It is the average unit contribution margin of multiple products waiting according to the percentage of units sold

Product mix
When multiple products are sold the break even point depends on the product mix

The break-even point can be affected by ______.
• sales mix
• total fixed costs
• product mix

CVP variable relationships