Question

Match the following terms to the appropriate statement by placing the letter to the left of each statement.

a.	Breakeven graph	f.	Markup
b.	Breakeven point	g.	Margin of safety
c.	Cost-plus pricing	h.	Operating leverage
d.	Cost-volume-profit analysis	i.	Sales mix
e.	Degree of operating leverage	j.	Target costing

____	Sales revenue is exactly equal to total costs, and there is no profit or loss.
____	The difference between current sales and breakeven sales.
____	Analysis that helps managers assess the impact of various business decisions on company profits.
____	The change in operating income relative to a change in sales.
____	The sales of each product relative to total sales
____	Adds an amount to the cost of the product or service to cover the company’s operating costs and contribute to its profit.
____	Computes the desired markup and the maximum cost the company can incur to deliver a product or service at the market price.
____	Illustrates the relationship between sales and costs, allowing managers to view a range of results in a single glance.
____	The difference between the selling price and the cost of the product.
____	A way to compute the expected change in operating income due to a change in sales volume at a given level of sales.

Answer 1

1) Sales revenue is exactly equal to total costs, and there is no profit or loss. B – Breakeven point

2) The difference between current sales and breakeven sales. G – Margin of safety

3) Analysis that helps managers assess the impact of various business decisions on company profits. D – Cost-volume-profit analysis

4) The change in operating income relative to a change in sales. H – Operating leverage

5) The sales of each product relative to total sales. I – Sales mix

6) Adds an amount to the cost of the product or service to cover the company’s operating costs and contribute to its profit. C – Cost-plus pricing

7) Computes the desired markup and the maximum cost the company can incur to deliver a product or service at the market price. J – Target costing

8) Illustrates the relationship between sales and costs, allowing managers to view a range of results in a single glance. A – Breakeven graph

9) The difference between the selling price and the cost of the product. F – Markup

10) A way to compute the expected change in operating income due to a change in sales volume at a given level of sales. E – Degree of operating leverage