Degree of Operating Leverage, DOL

Definition The degree of operation leverage or DOL is a ratio that shows how well a company manages its fixed costs to generate operating income or EBIT (Earnings before Interest and Taxes). The ratio itself… Read more

Break-even Analysis

Definition Break-even analysis is a managerial accounting technique that helps to estimate the relationship between sales volume and production costs. It helps to determine how the change in sales will affect the operating profit of… Read more

Contribution Margin

Definition The contribution margin (CM) is the difference between the selling price of a unit and variable cost per unit or the difference between a firm’s revenue and its total variable costs. In other words,… Read more