Match each item with the correct statement below.
-Sales revenue minus total variable cost or price minus unit variable cost.
A)break-even point
B)Common fixed expenses
C)Contribution margin
D)Direct fixed expenses
E)Margin of safety
F)Operating leverage
G)Degree of operating leverage
H)Sales mix

Question

Quizplus · Accepted Answer

Contribution margin is the amount left over after subtracting total variable costs from sales revenue or the difference between price and unit variable cost.

Answer: A 
 Break-even point is the level of sales at which total revenue equals total costs, meaning there are no profits or losses.

Answer: G 
 Degree of operating leverage measures the sensitivity of a company's earnings to changes in sales and is calculated by dividing contribution margin by net income.

Answer: D 
 Direct fixed expenses are expenses that are directly tied to a particular product or service and do not vary with changes in output.

Answer: E 
 Margin of safety is the difference between actual or projected sales and the break-even point and represents how much sales can decline before a company incurs losses.

Answer: F 
 Operating leverage measures the extent to which a company uses fixed costs to generate profits and is calculated by dividing fixed costs by total costs.

Answer: H 
 Sales mix refers to the proportion of each product sold compared to the total sales of all products and can impact a company's overall profitability.

Match Each Item with the Correct Statement Below