Cost-volume-profit (CVP) analysis
A tool that focuses on the relationship between a company's profits and (1) the prices of products or services, (2) the volume of products of services, (3) the per unit variable costs, (4) the total fixed costs, (5) the mix of products or services produce
Gross profit
The difference between sales and cost of goods sold
Contribution margin per unit
The sales price per unit of product less all variable costs to produce and sell the unit of product; used to calculate the change ni contribution margin resulting from a change in unit sales.
Contribution margin ratio
The contribution margin divided by sales; used to calculate the change in contribution margin resulting from a dollar change in sales.
Break-even point
The level of sales at which contribution margin just covers fixed costs and net income is equal to zero.
Operating leverage
The contribution margin divided by net income; used as an indicator of how sensitive net income is to a change in sales.