Flashcards
26 - marginal costing
Cards in this deck (14)
- 1what actually is marginal costingonly considers marginal costs which are costs that occur when extra units are produced
basically like variable costs, so costs that can be tied to output - 2what are indirect costscosts that are not tied to output
- 3name and describe the 3 types of costsvariable costs (direct proportion to output)
fixed costs (no direct proportion to output, also known as fixed overheads)
semi-variable costs (partly fixed and partly variable e.g. fixed line rental but variable call cost charge - 4what is a stepped fixed costwhen activity increases so much that fixed costs will have to increase e.g. as the business grows it may need to own new property
- 5what is the equation for contributionselling price - total direct costs
- 6what is the equation for break even unitsoverheads - contribution per unit
- 7what is the equation for target profit units(overheads + target profit) / contribution per unit
- 8what is the equation for profit(contribution per unit x units) - fixed overheads
- 9what is contributionthe amount of money made per unit towards covering fixed costs and profit
- 10what is the margin of safetythe amount of units between those needed to break even and those needed to make target profit
- 11give 6 limitations of break even analysisassumes that all inventory has been sold, usually calculated for a single product, semi-variable costs are not counted, fixed costs are assumed to remain the same the whole time, variable costs are assumed to be perfectly linear with production, selling price is assumed to remain the same
- 12when can marginal costing be used in decision makingwhether to make or buy products, whether to accept a special order, how to maximise profits with limited resources
- 13what is a make or buy situationdeciding whether to continue to buy manufactured goods or to produce it themselves
- 14what is the equation for contribution to sales ratiocontribution / selling price
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- A level Accounting Flashcards on 26 - marginal costing, created by Olivia Harlington on 04/05/2020.
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- Olivia Harlington
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