Chapters 1-3 Flashcards
Monitoring day-to-day operations
Taking corrective action needed
Controlling
Setting strategic and operational goals and objectives
Planning
Comparing actual results to planned results
Assessing individual performance
Taking corrective action as needed
EVALUATING
Using information to choose the best alternative from available options made in pursuit of a particular goal or objective
DECISION MAKING
Which type of “cost” is this?
Cost per unit remains constant with changes in volume
Total cost varies proportionately with changes in volume
Variable Cost
eg: Hotel chain Commercial airline Cereal manufacturer Automobile manufacturer
Which type of “cost” is this?
Total cost remains constant with changes in volume
Unit cost changes inversely with changes in volume
Fixed Cost
Which type of “cost” is this?
Cost remains fixed in total over small range of volume or activity
These small ranges are smaller than the relevant range of fixed cost
STEP-VARIABLE COST
Which type of “cost” is this?
Cost contains both fixed and variable components
Total cost AND unit cost varies with changes in volume
MIXED COST
y = mx + b
What does each letter in the equation represent
MIXED COST FORMULA
y is total cost
m is the variable cost per unit
x is the level of activity (number of units)
b is total fixed cost
Total Variable Cost + Total Fixed Cost
Total Cost
Variable Cost per Unit X Total Units Produced
Total Variable Cost
(VC per unit x units) + Fixed Cost
Total Cost
(High Cost – Low Cost) / (High Activity – Low Activity)
High-Low Method
THE HIGH LOW IS JUST AN ESTIMATE
Sales – Variable Expenses
Contribution Margin
Contribution Margin – Fixed Expenses
Operating Income
