Chapter 5 Flashcards
CVP Analysis Income Statement, Acronym
Some Very Crucial Financial Numbers
Sales, Variable Costs, Contribution Margin, Fixed Costs, Net Income
What is Break Even Analysis?
It’s when total revenues equal total costs (variable and fixed)
High and :Low Method Acronym To Find Variable Cost
C.D
After findind Variable cost, how to find fixed cost formula?
Total cost at high/low activity level - variable cost per unit x # of units at that activity level
Prepare CVP Income statement
What are the parts inside of a mixed cost?
Mixed costs (also called semi-variable costs) have both a fixed component (incurred regardless of activity level) and a variable component (changes with activity).
What are 3 examples of mixed costs?
Utilities, maintenance, shipping costs
Break even analysis
Computation of break-even point in sales units
Equation for break-even point in sales dollars using contribution margin ratio
Equation for break-even point in sales dollars using contribution margin ratio
Break Even Analysis
When using the Sales - Variable - Fixed Costs = Net Income, What do you want the net income to be when you start the equation?
Zero, because the break even level is 0
Target Net Income
Equation for sales units required to achieve target net income using unit contribution margin
Margin of Safety
Margin of safety is the difference between actual or expected sales, and sales at the break-even point.
Margin of Safety
Equation for margin of safety in dollars
Margin of Safety
Equation for margin of safety ratio
