summarizes the effects of changes in an organization's volume of activity on its costs, revenue, and profit a necessary first step in any cost-volume-profit analysis the volume activity where the organization's revenues and expenses are equal; at this amount of sales, the organization has no profit or loss = total sales revenue - total variable expenses; the amount of revenue that is available to contribute to covering fixed expenses after all variable expenses have been covered = fixed expenses / unit contribution margin the unit contribution margin divided by the unit sales price = fixed expenses / contribution margin ratio this graph captures the relationship between profit and volume of activity this is determined by the intersection of the total-revenue line and the total-expense line Alternative graph that highlights amount of profits and losses; intercepts the vertical axis at the amount equal to fixed expenses and the zero activity level; crosses the horizontal axis at the break-even point

1. cost-volume-profit analysis

summarizes the effects of changes in an organization's volume of activity on its costs, revenue, and profit

2. analyzing an organization's cost behavior

a necessary first step in any cost-volume-profit analysis

3. break-even point

the volume activity where the organization's revenues and expenses are equal; at this amount of sales, the organization has no profit or loss

4. total contribution margin

= total sales revenue - total variable expenses; the amount of revenue that is available to contribute to covering fixed expenses after all variable expenses have been covered

5. break-even point

= fixed expenses / unit contribution margin

6. contribution margin ratio

the unit contribution margin divided by the unit sales price

7. break even point in sales dollars

= fixed expenses / contribution margin ratio

8. CVP graph

this graph captures the relationship between profit and volume of activity

9. break-even point

this is determined by the intersection of the total-revenue line and the total-expense line

10. profit-volume graph

Alternative graph that highlights amount of profits and losses; intercepts the vertical axis at the amount equal to fixed expenses and the zero activity level; crosses the horizontal axis at the break-even point