TERM 1
What is CVP and what does it stand
for?
DEFINITION 1
It stands for Cost-Volume-Profit Analysisand it studies the
relationship among total revenues, total costs, and income as
changes occur in units sold
TERM 2
What is the contribution margin? What is the
equation?
DEFINITION 2
The contribution margin is why operating income changes as
the number of units sold changes.The equation is:Total
Revenues - Total Variable Costs
TERM 3
What is the contribution margin per unit?
What equation is used to find Contribution
Margin? how is CM/unit found?
DEFINITION 3
Contribution margin per unit is used to find the total
contribution margin.Contribution Margin = CM/unit x amount
of units soldContribution Margin per unit = Selling Price -
Variable Costs per unit
TERM 4
What is Contribution Margin Percentage
(CM%)? How is it found?
DEFINITION 4
Contribution Margin Percentage is the amount of contribution
margin per $1 of revenue. The equation isContribution
Margin per unit / Selling Price per unit
TERM 5
What is Operating Income? What is the
equation to find it?
DEFINITION 5
Operating Income is the contribution margin less the fixed
costs[(Selling price - variable cost per unit) x (quantity sold)]
- fixed costsOR(CM/unit x quantity sold) - fixed costs
