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Acct 2302 > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

How do you calculate total contribution margin?

A

Total CM = Sales - Variable Cost

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2
Q

How do you calculate unit contribution margin?

A

Unit CM = Selling Price - VC

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3
Q

What is the cost volume profit equation using contribution margin?

A

Profit = (SP - VC) Q - TFC

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4
Q

How do you calculate contribution margin ratio?

A

CM ratio = CM/Sales

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5
Q

How do you calculate contribution margin ratio per unit?

A

CM ratio per unit = CM per unit / SP

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6
Q

What is the cost volume profit equation using CM ratio?

A

Profit = (sales * CM ratio) - TFC

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7
Q

What are the two equations to find variable expense ratio?

A
  1. Variable expense / sales
  2. 1 - CM ratio
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8
Q

How do you calculate breakeven units?

A

Break even units = TFC / CM

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9
Q

How do you calculate breakeven dollars?

A

Break even dollars = TFC / CM ratio

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10
Q

How do you calculate the target profit in units?

A

Target Profit Units = (Target Profit + TFC) / CM

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11
Q

How do you calculate target profit in sales?

A

Target Profit Sales = (Target Profit + TFC) / CM ratio

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12
Q

How do you calculate margin of safety in words?

A

Difference between expected/actual sales and break even sales

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13
Q

What does operating leverage measure?

A

How % change in sales will affect profit

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14
Q

How do you calculate degree of operating leverage?

A

Degree of Op. leverage = CM / NOI

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15
Q

How do you calculate percent change in net operating income for a percent change in sales?

A

Degree of operating leverage * % change in sales

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16
Q

Describe the High Low method?

A

Y = mx + b
mx = change in cost / change in hours
b(max) = total cost - total variable cost

TVC -> mx * hours

17
Q

Describe account analysis.

A

Each account is classified as either variable or fixed, based on the analyst’s knowledge of how the account behaves.

18
Q

Describe the engineering approach.

A

Classifies costs based on an industrial engineer’s, evaluation of production methods, and material, labor, and overhead requirements.

Acct 2302 (5 decks)

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