Exam 2 Flashcards
How to find the contribution margin?
Sales revenue - variable expense
Total cost doesn’t change with changes in volume of activity (within the relevant range). the cost per unit will change as volume (number of units) change. the total may be different than expected, however this will not be due to changes in the volume of units made or sold.
Fixed cost
cost that will always be fixed?
rent, salaries, property tax
changes in total in direct proportion to changes in the level of activity. the total cost increases/decreases as units made increases or decreases
variable cost
items that will always be variable cost?
DM, DL, Vmoh, sales commision, shipping
it is a ___ cost if it cost you more if you make or sell more?
variable
if you sell more it cost you more?
variable cost
if you pay a set amount regardless of volume
fixed cost
MOH is almost always __ besides __
fixed, utilities
cost that are paid monthly/anually. anytime you see “worker or inspector”. remains constant in total
fixed cost
__ cost per unit will remain constant
variable cost
total __ cost will change with changes in activity but cost per unit doesnt change
varibale
As volume increases __ cost will stay the same, and __ cost per unit will stay the same
fixed; variable
Break even point in sales units?
Total fixed cost/(price per unit - variable cost per unit)
break even point in sales dollars?
price per unit X break even sales units
measures the percent of change as a result of a change in percent in the level of output?
Degree of operating leverage
Helps in measuring the business risk?
Degree of operating leverage
Calculate the degree of operating leverage?
(sales - vc) / (sales - vc - fc)
Method that estimates how changes in the following three factors affect a companies profits: cost (both variable and fixed), sales volume, price.
cost volume analysis
__ costing is also known as direct or marginal costing
variable
using __ costing a unit of product includes DM, DL, Vmoh., Fmoh
absopriton
using __ costing a unit of product includes DM, DL, Vmoh
variable
product costing under __ costing is characteristically higher than under __ costing
absorption, variable
__ costing is attractive to managers as an alternative to __ costing because to generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under __ costing
variable; absorption; absorption
when production is equal to sales, __ change occurs to inventories for either absorption or variable costing methods?
no change
Net operating income in not effected by changes in production under __ costing?
variable
cost that are common to several products, processes, activities, departments, territiories, etc. often common cost are subsequently allocated to each of the joint products , joint processes, etc. in order to determine the cost of each.
common cost
a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each
activity based costing
What company should use activity based costing
companies with significant amount of overhead pertaining to diversity of activities in providing goods or services to customers where demands also vary
benefits of budgeting?
communicate managers plans
forces employees to think about and plan for the future
serves as a means for allocating resources
helps identify potential bottlenecks
coordinates activities
establishes benchmarks for evaluating performance
order of budgets?
sales, production, DM, DL, MOH, selling and admin, cost of goods manufactured, cash
a 12 month budget that rolls forward one month or quarter as the current month is completed, this approach keeps managers focused at least one year ahead so that they do not become to narrowly focused on short term results
continuous budget
shows the DL hours required to satisfy the production budget, by knowing in advance how much labor time will be needed through out the budget year, the company can develop plans to adjust the labor force as the situation requires.
DL budget
the most effective method of budget preparation. a budget that is prepared with full cooperation and participation of managers at all levels. one important limitation of this method is that lower level managers may allow to much budget slack
self imposed
contribution format income statement using variable costing
sales VCOGS V sales and admin Contribution margin FMOh F sales and admin Net income
income statement for absorption costing
Sales COGS (DM, DL, VMOH, FMOH) GM Selling and admin expense Net income
Direct material budget
Production Materials per unit production needs add desired ending inv total needed less beginning inv materials to be purchased
Cash budget
Beginning cash balance that month cash sales credit sales total cash received total cash available
less discrepancy:
expenses
finance:
borrow
repay principle
pay interest
ending balance
three steps to activity based costing
Step 1: find the cost per activity by dividing
Step 2: assign the cost by multiplying (gives you MOH)
Step 3: find the total cost or margin by (+) or (-)
sales
dm
dl
moh
