COB 242 Chapter Notes - Chapter 5-7: Activity-Based Costing, Earnings Before Interest And Taxes, Operating Leverage

• School: JMU
• Department: College of Business
• Course: COB 242
• Professor: Sandra Cereola

Document Summary

Breakeven point: the level of sales at which profit is zero. Contribution margin ratio: a ratio computed by dividing contribution margin by dollar sales. Cost volume profit (cvp) graph: a graphical representation of the relationships between a(cid:374) orga(cid:374)izatio(cid:374)"s re(cid:448)e(cid:374)ues, (cid:272)osts, a(cid:374)d profits o(cid:374) the o(cid:374)e ha(cid:374)d a(cid:374)d its sales (cid:448)olu(cid:373)e o(cid:374) the other hand. Degree of operating leverage: a measure, at a given level of sales, of how a percentage change in sales will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income. Incremental analysis: an analytical approach that focuses only on those costs and revenues that changes as a result of a decision. Margin of safety: the excess of budgeted or actual dollar sales over the breakeven dollar sales. Operating leverage: a measure of how sensitive net operating income is to a given percentage change in dollar sales. Sales mix: the relative proportions in whi(cid:272)h a (cid:272)o(cid:373)pa(cid:374)(cid:455)"s produ(cid:272)ts are sold.