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37.      The incremental approach means that a manager focuses on the effects of changes from the current condition.

38.       An increase in sales price would cause a decrease in the break even point.

39.     Target sales volume in units = (variable expenses + target net income) / unit contribution margin.
40.     Target sales – variable expenses – fixed expenses = target net income.
41.     The reliability of computer models used in CVP analysis depends on the accuracy of their underlying assumptions about how revenues and costs may actually be affected.
42.     The benefits of increased accuracy of using a computer model in CVP analysis always exceed the costs.

43.     Generally, companies that spend heavily for advertising are willing to do so because they have low contribution-margin percentages.
44.     An industry that has a high contribution-margin percentage is the airlines.
45.     Manufacturers of industrial equipment have high contribution-margin percentages.
46.     Small increases in profits occur for high contribution-margin ratio companies when sales grow.

47.     Operating leverage is the ratio of fixed costs to variable costs.
48.     Highly leveraged companies have low fixed costs and high variable costs.
49.     In highly leveraged companies, small changes in sales volume result in large changes in net income.
50.     Highly leveraged companies are less risky than companies with low leverage.
51.     The margin of safety shows how far sales can fall below the planned level of sales before losses occur.
52.     A small margin of safety may indicate a risky situation.
53.     Margin of safety = actual unit sales – planned unit sales.

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