| A | B |
|---|
| Break-even point | The sales volume at which profit is zero. |
| Contribution margin | Amount of revenue that goes toward fixed costs and profits. |
| CMR | Contribution margin per unit sales divided by selling price. |
| CMRw | Used as the denominator in the CVP equation in a multiple-product operation. |
| Margin of safety | The excess of budgeted or actual sales over sales at break-even. |
| Operating leverage | The extent to which an operation's costs are fixed rather than variable. |
| Sensitivity analysis | Changes independent variables and measures the effect on the dependent variables. |
| CVP graph | Shows the relationships of the variables graphically. |
| X-axis | On a CVP graph, this represents volume. |
| Y-axis | On a CVP graph, this represents costs and revenues. |
| High operating leverage | Causes a small increase in sales beyond the break-even point results in a large increase in net income. |
| Profit | The area above the break-even point represents this. |
| Loss | The area below the break-even point represents |
| A limitation of CVP analysis. | Exclusion of qualitative factors. |
| Fixed costs | On a CVP graph represented by a horizontal line. |
| Low operating leverage | A high percentage of variable costs relative to fixed costs. |
