Question

Using terminology Match the following terms with the correct definitions:

1. Costs that do not change in total over wide ranges of volume.

2. Technique that estimates profit or loss results when conditions change.

3. The sales level at which operating income is zero.

4. Drop in sales a company can absorb without incurring an operating loss.

5. Combination of products that make up total sales.

6. Net sales revenue minus variable costs.

7. Describes how a cost changes as volume changes.

8. Costs that change in total in direct proportion to changes in volume.

9. The band of volume where total fixed costs and variable cost per unit remain constant.

a. Breakeven point

b. Contribution margin

c. Cost behavior

d. Margin of safety

e. Relevant range

f. Sales mix

g. Fixed costs

h. Variable costs

i. Sensitivity analysis

Short answer

1. g.
2. i.
3. a.
4. d.
5. f.
6. b.
7. c.
8. h.
9. e.

Step-by-step solution

Meaning of cost-volume profit analysis

The cost-volume-profit (CVP) may be a planning tool that describes the relation between cost, volume, and costs and their effects on profit and losses.

Matching terms with correct definitions

1. Costs that don’t change in total over wide ranges of volume.	g. Fixed cost
2. Technique that estimates profit or loss results when conditions change.	i. Sensitivity analysis
3. The sales level at which operating income is zero.	a. Breakeven point
4. Drop by sales a corporation can absorb without incurring an operating loss	d. Margin of safety
5. Combination of products that form up total sales.	f. Sales mix
6. Income revenue minus variable costs.	b. Contribution margin
7. Describes how a value changes as volume changes.	c. cost behavior
8. Costs that change in total in direct proportion to changes in volume.	h. Variable costs
9. The band of volume where total fixed costs and variable cost per unit remain constant.	e. Relevant range