the desired profit level = (fixed expenses + target net profit) / unit contribution margin = (fixed expenses + target net profit) / contribution-margin ratio the difference between the budgeted sales revenue and the break-even sales revenue for any organization selling multiple products, the relative proportion of each type of product sold the average of the several products' unit contribution margins, weighted by the relative sales proportion of each product allows a managerial accountant to investigate the impact on profit of changes in sales volume, prices, variable costs, fixed costs, or the sales mix itself behavior of total revenue is linear, behavior of total expenses is linear, sales mix remains constant over the relevant range, inventory levels at the beginning and end of the period are the same analysis used to determine how "sensitive" a model is to changes in specific parameters, or policies, or structures

1. target net profit

the desired profit level

2. number of sales units required to earn target net profit

= (fixed expenses + target net profit) / unit contribution margin

3. dollar sales required to earn target net profit

= (fixed expenses + target net profit) / contribution-margin ratio

4. safety margin

the difference between the budgeted sales revenue and the break-even sales revenue

5. sales mix

for any organization selling multiple products, the relative proportion of each type of product sold

6. weighted-average unit contribution margin

the average of the several products' unit contribution margins, weighted by the relative sales proportion of each product

7. multiproduct cvp analysis

allows a managerial accountant to investigate the impact on profit of changes in sales volume, prices, variable costs, fixed costs, or the sales mix itself

8. four general assumptions for cvp analysis to be valid

behavior of total revenue is linear, behavior of total expenses is linear, sales mix remains constant over the relevant range, inventory levels at the beginning and end of the period are the same

9. sensitivity analysis

analysis used to determine how "sensitive" a model is to changes in specific parameters, or policies, or structures. if the behavior of a model changes drastically, that suggests a critically important factor, or high sensitivity. conversely, if a large change results in little change in behavior, that factor is not likely to be central to the dynamics in question, that is, it shows low sensitivity

10. contribution income statement

income statement that groups costs into variable costs and fixed costs to highlight the distinction between between these expenses