What are gross sales? Definition of Gross Sales Gross sales are the amounts a company earned from selling its products. The amounts originate from the company’s sales invoices but the total will be adjusted to the...
What are gross sales? Definition of Gross Sales Gross sales are the amounts a company earned from selling its products. The amounts originate from the company’s sales invoices but the total will be adjusted to the...
What is gross pay? Definition of Gross Pay Gross pay is the amount an employee is paid before the employer withholds FICA (Social Security and Medicare payroll taxes), income taxes (federal, state, local) if applicable,...
An employee’s pretax compensation that is based on annual or monthly amounts rather than an hourly rate. Management employees are usually paid salaries. To learn more, see Explanation of Payroll Accounting.
Net sales revenues minus the cost of goods sold.
What are gross wages? Definition of Gross Wages Gross wages are the amounts earned by employees before the payroll withholding taxes and other deductions are subtracted. Sometimes gross wages is used to describe the...
Sales before deducting sales returns, sales allowances, and sales discounts.
An employee’s pretax compensation based on hours worked times an hourly rate of pay. Production workers and nonmanagement employees are usually paid wages. To learn more, see Explanation of Payroll Accounting.
See gross profit percentage.
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
What is contribution margin? Definition of Contribution Margin In accounting, contribution margin is defined as: revenues minus variable expenses. The contribution margin can be expressed as an amount and/or as a...
Net income divided by net sales.
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
A term used in break-even analysis to indicate the amount of sales that are above the break-even point. In other words, the margin of safety is the amount by which a company’s sales could decrease before the...
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
sales decrease. 7. Contribution margin is defined as sales (or revenues) minus variable expenses. True Right! This is the correct answer. False Wrong. The correct answer is 'True.' 8. Break-even point is the...
How much of the contribution margin is profit on units sold in excess of the break-even point? After the break-even point is reached, the entire contribution margin on the next units sold will be profit…provided the...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
on knowing how a company’s costs or expenses will change as the volume of sales change. The break-even point calculation is based on the following amounts: Total amount of fixed expenses Variable expenses per unit or...
What is the break-even formula? Break-even Point in Units of Product The formula for determining the break-even point in units of product sold is: total fixed expenses divided by the contribution margin per unit. For...
expenses. These include rent, depreciation, salaries of managers and executives, etc. A reduction in the contribution margin. Contribution margin is sales minus the variable expenses. Hence, an increase in the variable...
Is contribution margin the same as operating income? Definition of Contribution Margin Contribution margin is defined as revenues minus the variable costs and variable expenses. Example of Contribution Margin Assume that...
How do you calculate the break-even point in terms of sales? Definition of Break-even Point in Sales Dollars The break-even point in sales dollars can be calculated by dividing a company’s total fixed expenses by the...
at $__________. 23. The product’s contribution margin per unit is $__________. 24. The product’s gross profit per unit is $__________. 25. Assuming the company manufactured and sold 100,000 units, its net income...
See Explanation of Inventory and Cost of Goods Sold.
component and a variable component. Mark as wrong Mark as right break-even point in units This is the result of dividing a company’s fixed expenses for a period of time by the contribution margin per unit of product....
. The break-even point could be determined by using an electronic spreadsheet or by using a formula. The key is to determine how each of the company’s costs and expenses behave in order to compute the total amount of...
(including semivariable expenses) into fixed costs/expenses and variable costs/expenses. For simple businesses with similar products or services, the total amount of fixed costs/expenses is divided by the...
), in units, hours of services provided, etc. The basic calculation of the break-even point in sales dollars for a year is: fixed expenses (fixed manufacturing, fixed SG&A, fixed interest) for the year divided by the...
___________ are equal to total costs. REVENUES UERVNESE Unscramble REVENUES RVEUEENS Unscramble 2. Revenues minus variable costs equals the _________________ margin. CONTRIBUTION BNIUTRCNTIOO Unscramble CONTRIBUTION...
The revenue from the next unit.
What is marginal cost? Definition of Marginal Cost Marginal cost is a manufacturer’s cost to produce one more unit of product. In other words, marginal cost is the change in total costs when one additional unit is...
The cost of the next unit.
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
What causes a variation in profit margin and turnover ratios between industries? Mega grocery stores, discount stores, and warehouse clubs often have small profit margins but have high turnover ratios. The small profit...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
will be too small). The owner’s (or stockholders’) equity will also be too low because of the effect on net income (see next bullet point) The income statement for the current period will overstate (report too much)...
. Knowing how costs behave when sales or other activities change will allow you to better understand how a company’s gross profit and net income will change. It also allows you to quickly calculate a product’s...
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