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Chapter 9 planning and control 9-1 cost-volume-profit analysis Relevant Glossary cost-volume-profit(CVP)analysis 本量利分析 contribution margin 边际贡献 variable expense 变动成本 fixed expense 固定成本 contribution margin ratio(CM ratio) 边际贡献率 equation method 等式法 break-even point 盈亏平衡点 contribution margin method 贡献毛益法 margin of safety 安全边际 margin of safety percentage 安全边际率 operating leverage 经营杠杆 Sales mix 混合销售 Cost-volume-profit (CVP) analysis is one of the most powerful tools that managers have at their command. It helps them understands the interrelationship between cost, volume and profit in an organization by focusing on interactions between the following five elements: Price of products Volume or level of activity Per unit variable costs Total fixed costs Mix of products sold Contribution margin is the amount remaining from sales revenue after variable expenses have been deducted. Thus ,it is the amount available to cover fixed expenses and then to provide profits for the period. Notice the sequence here棗contribution margin is used first to cover the fixed expenses, and then whatever remains goes toward profit . if the contribution margin is not sufficient to cover the fixed expenses, then a loss of occurs for the period. bThe percentage of contribution margin to total sales is referred to as the contribution margin ratio(cm ratio). This ratio is computed as follows: CM ratio =CM/sales CVP analysis is sometimes referred to simply as break-even analysis. This is unfortunate because break-even analysis is only one elements of CVP analysis. Breaking-even analysis can be approached in two ways棗fist, by the equation method; and second, by the contribution margin method. gThe equation method centers in the contribution approach to the income statement. The format of this statement can be expressed in equation from as follow