Question

Select the term from the list provided that best describes each of the following descriptions or definitions.

Your Answer	Description or Definition	Term
	A. The sales volume that equates total revenue with total costs	1. Break-even point
	B. A strategy that sets the selling price at an amount sufficient to recover a specified amount or percentage of profit based on the product's cost	2. Contribution margin per unit
	C. (Total sales - Total variable costs) divided by Number of units sold	3. Contribution margin ratio
	D. Spreadsheet technique that analyzes "What if" questions to assess the impact on profits of simultaneous change in costs and volumes	4. Cost-plus pricing
	E. A strategy that sets the selling price based on competitive forces and then determines what cost structure will allow the firm to earn its desired profit	5. Cost-volume-profit analysis
	F. The examination of the interrelationships between selling prices, volumes, and variable and fixed costs	6. Equation technique
	G. (Selling price ? Variable costs)/Selling price	7. Margin of safety
	H. A strategy that sets selling price based on the assumption that people will pay more for a product because of its brand name or media attention	8. Prestige pricing
	I. (Budgeted sales ? Break-even sales) divided by Budgeted sales	9. Sensitivity analysis
	J. Break-even point = (Unit selling price × number of units sold) = Total fixed costs + (Unit variable cost × Number of units sold)	10. Target pricing

Answer 1

1.Break-even point - A. The sales volume that equates total revenue with total costs. [ At break even point there is a situation of no profit no loss, because total revenue is equal to total cost.].

4. Cost- plus pricing - B. A strategy that sets the selling price at an amount sufficient to recover a specified amount or percentage of profit based on the product's cost. [ In this first all costs are added together and then a markup percentage is added to get price.]

2. Contribution margin per unit- C. (Total sales - Total variable costs) divided by Number of units sold

9. Sensitivity analysis- D. Spreadsheet technique that analyzes "What if" questions to assess the impact on profits of simultaneous change in costs and volumes. [It is a  technique used to determine how different values of an independent variable impact a particular dependent variable under a given set of assumptions.]

10. Target pricing - E. A strategy that sets the selling price based on competitive forces and then determines what cost structure will allow the firm to earn its desired profit.[ Target pricing is the process of estimating a competitive price in the marketplace and applying a firm's standard profit margin to that price in order to arrive at the maximum cost that a new product can have.]

5. Cost-volume-profit analysis costs. F. The examination of the interrelationships between selling prices, volumes, and variable and fixed costs. [ This analysis shiws relation between cost ,volume and profit].

3. Contribution margin ratio - G. (Selling price ? Variable costs)/Selling price.

8. Prestige Pricing - H.A strategy that sets selling price based on the assumption that people will pay more for a product because of its brand name or media attention. [Prestige pricing is a physiological pricing strategy that sets prices of luxury products to the expectations of a niche class of customers who associate higher prices with superior quality.]

7. Margin of saftey - I. ((Budgeted sales ? Break-even sales) divided by Budgeted sales.

6. Equation technique - J. Break-even point = (Unit selling price × number of units sold) = Total fixed costs + (Unit variable cost × Number of units sold).