Exam 2 Flashcards
How to find contribution Margin
Sale price - variable exp.
How to find margin of safety
Current sales - breakeven sales = margin of safety
What is included in variable costing?
DM, DL, and variable MOH
What is included under absorbtion costing?
Everything in variable + fixed MOH
How to find variable cost per unit
Selling price - DM - DL - VMOH - VS&A
How to find total gross margin
sales rev - cogs
How to find COGS
absorbtion cost puer unit X units sold
How to find absorbtion cost per unit
total variable manufacturing cost per unit + FMOH per unit
Net operating income under absorbtion costing
Gross margin - total S&A expenses
Net operating income under variable costing
total contribution margin - fixed MOH - fixed S&A expenses
How to find contribution margin ratio?
CM / Sales Price
WACM formula
Total $ in sales of mix / # units in mix
How to find total gross margin
Sales rev - COGS
Are past revenues and costs relevant when making decisions?
NO
Are common fixed costs relevant when making future decisions about production?
NO - they are unavoidable
Are direct fixed costs relevant when making future decisions about production?
YES - they are traceable
What happens to foregone opportunity cost when determining if a deal is worth it?
You add the $ amount to the expenses
If determining a special order and the order goes beyond capacity, how do we calculate it?
You have to subtract the foregone revenue from selling to normal customers
Is fixed MOH relevant when evaluating a new deal?
NO
Degree of operating leverage (DOL)
Contribution Margin / Net Operating Income
Breakpoint revenue formula shortcut
Fixed cost + Target op. income / CM per unit
Breakeven # of units needed shortcut
Fixed cost + Target Operating Income / CM ratio
