Key Terms - Chapter 18

Key Terms - Chapter 18 - Break-even point Output level at...

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Break-even point- Output level at which sales equals fixed plus variable costs; where income equals zero. Composite unit- Generic unit consisting of a specific number of units of each product; unit comprised in proportion to the expected sales mix of its products. Contribution margin per unit- Amount that the sale of one unit contributes toward recovering fixed costs and earning profit; defined as sales price per unit minus variable expense per unit. Contribution margin ratio- Product's contribution margin divided by its sale price. Cost-volume-profit (CVP) analysis- Planning method that includes predicting the volume of activity, the costs incurred, sales earned, and profits received. Curvilinear cost- Cost that changes with volume but not at a constant rate. Degree of operating leverage (DOL)- Ratio of contribution margin divided by pretax income; used to assess the effect on income of changes in sales. Estimated line of cost behavior-
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