10/7 Class Flashcards
we talked about
the high low method, and regression analysis,
high low method
fixed costs are the intercept, break even is the place the two lines intercept
Income statements
traditional Sales -COGS GM -SGA NI CM Sales -VC CM -FC NI
fixed costs graph
flat for total
regressing for unit costs
absorption costing
we place the fixed costs under COGS
Variable costign
we place the fixed costs to MOH
producing for inventory
overproducing to bring down our net income in variable costing
factors that influence demand
price consumer income quality goods availability of substitutes demand for complementary goods necessity or luxary
price elasticity of demand
%change in quantity/%change in price
if demand is relatively elastic, a small percent change in price will lead to a greater percent change in quantity demanded
perfect competition
many buyers and sellers, no one of which is large enough to influence the market
monopolistic competition
has both the characteristics of both monopoly and perfect competition
oligopoly
few sellers
monopoly
barriers to entry are so high that there is only one firm in the market
cost based pricing
prices are established using cost plus markup
target pricing
prices are influenced by the market conditions
markup on COGS
(selling and administrative expenses + operating income)/COGS
penetration pricing
pricing of a new product at a low initial price to build market share quickly
price skimming
a higher price is charged when a product or service is first introduced
predatory pricing
practice of setting prices below cost for the purpose of injuring competitors and eliminating competition, known as dumping on the international market
price discrimination
charging different prices to different customers
it is illegal unless there is a competitive agreement
price gouging
when firms with market power price products too high, if they know it will be essential
profit
measure of the difference between what a firm puts into making and selling a product or service and what it receives
profits are measured to
Determine the viability of the firm
Measure managerial performance
Determine whether or not a firm adheres to government regulations
Signal the market about the opportunities of market share
absorption costing
includes FMOH as product costs
variable costing
includes FMOH as a period costs
Production > Sales
Absorption costing income > variable costing income
Inventory increases
production < sales
Absorption costing income < variable costing income
inventory decreases
production = sales
Absorption costing income = variable costing income
inventory stays the same
