Flashcards
Acct Exam 2
Cards in this deck (34)
- 1Total Contribution Margin FormulaRev - Var Costs
- 2Unit Contribution Margin FormulaSP- Var Costs/unit
(where unit is the var cost over unit) - 3CVP EquationProfit= (SP*Q) - TFC
also: profit=((SP-VC/unit) *Q) - TFC - 4Contribution Margin RatioTotal= CM / Sales
Per unit = CM Per unit / SP - 5Variable Expense RatioVARI EXP RATIO = VARI EXPENSES / SALES (or per unit VC/SP)
- 6Break Even Pointthe point where profit equals 0; it can be expressed in units or $
- 7Break Even Point in Units0=(CM * Q) - TFC
BREAK EVEN Q= TFC/CM - 8Break Even in Dollars0 = (CM RATIO * SALES) - TFC
BREAK EVEN SALES = TFC/CM RATIO - 9Target profitto find the Q (or sales $) to meet a target profit, substitute the targeted profit into the break-even formula. Instead of Zero Profit for breakeven, the target is something higher.
- 10Target Profit UnitsQ = (TARGET PROFIT + TFC)/CM
- 11Target Profit SalesSALES = (TARGET PROFIY + TFC)/CM RATIO
- 12Margin of Safetythe difference between expected sales and breakeven sales
ACTUAL SALES - BREAK EVEN SALES
BUDGETED SALES - BREAK EVEN SALES
MOS % = MARGIN OF SAFETY IN $ (units) / TOTAL SALES $ (or units) - 13Operating Leveragemeasures how a change in sales will affect profit; a function of the amount of fixed cost in company’s cost structure
- 14DEGREE OF OPERATING LEVERAGECONTRIBUTION MARGIN/NET OPERATING INCOME
- 15% change in NOI for a % change in salesDEGREE OF OPERATING LEVERAGE *
% CHANGE IN SALES - 16Product Cost Under Absorption (full) Costing:Direct material (DM)
Direct Labor (DL)
Variable Manufacturing Overhead (VMOH)
Fixed Manufacturing Overhead (FMOH) - 17Product Cost Under Variable Costing:Direct Material
Direct Labor
Variable Manufacturing Overhead - 18Income Statements: Variable Costinguses a Contribution Format Income Statement
Contribution Margin- enable CVP analysis - 19Income Statements: Absorption Costinguses a Traditional Format Income Statement
Gross Margin- Required by GAAP - 20difference between Full and Variable Costing Net Operating IncomeDIFFERENCE = UNIT CHANGE IN INVENTORY * FIXED MOH COST PER UNIT
- 21If Production = Sales. thenNet Operating Income is the same (Absorption = Variable)
- 22If Production > Sales, thenAbsorption > Variable
- 23If Production < Sales, thenAbsorption < Variable
- 24Segment Marginany part/activity of an organization about which a manager seeks cost, revenue, or profit data
- 25Traceable (direct) Fixed Costsarise b/c of the existence of a particular segment and would disappear over time if the segment itself disappeared (ex. salary of Fritos product manager of the Fritos segment)
-should be separated from common (allocated) fixed costs to enable the calculation of a segment margin which includes traceable fixed costs - 26Common Fixed Costsarise b/c of the overall operation of the company and would not disappear if any particular unit of the segment would disappear (ex. salary of the CEO of PepsiCo of the various divisions of PepsiCo)
-Contribution (variable costing) format should be used b/c it separates fixed from variable costs and it enables the calculation of contribution margin - 27Opportunity Costthe potential benefit given up when one alternative is selected over another
- 28Avoidable Costa cost that can be eliminated by choosing one alternative over another
- 29Sunk Costa cost that has already been incurred and cannot be changed regardless of what a manager decides to do
- 30Joint coststwo or more products produced from a common input
Formula: Physical Quantity of A/ (Physical Quantity of A + B) * JC - 31Split-off pointthe point in the manufacturing process where each joint product can be recognized as a separate product
- 32High Low Method of Separating MIXED Costs First, find var rate Then using either High or Low, find fixed costsVAR RATE = (COSTS AT HI ACTIVITY - COSTS FROM LOW ACTIVITY) / (HI ACTIVITY - LOW ACTIVITY)
FIXED COSTS = TOTAL COSTS - (VAR RATE) x (ACTIVITY) - 33Cost Estimating EquationTOTAL COSTS = FIXED COSTS + (VAR RATE x ACTUAL ACTIVITY)
- 34Difference between ACI & VCI(CHANGE IN INVENTORY UNITS)(FIXED OH PER UNIT)
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- Business/Economics Flashcards on Acct Exam 2, created by Lauren Comeaux on 27/03/2022.
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- Lauren Comeaux
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