Lecture 4 Flashcards
What are committed fixed costs?
Committed fixed costs are Long-term, cannot be reduced in the short term.
give me some examples of commited fixed costs?
examples of commited fixed costs: Depreciation on Buildings and Equipment
What are discretionary fixed costs?
discretionary fixed costs are costs that may be altered in the short term by managerial decsions
what are mixed costs?
Mixed (Semi-variable) Costs has both fixed and variablecomponents. eg an electric bill with a fixd monthly minimum.
give me some examples of commited fixed costs?
some examples of commited fixed costs:
Advertising and Research and Development
when a question asks for a cost formula what do they mean?
it is a mixed/semi vairable cost and tehy want it in a straight line equation y=ax+b
what are the steps to the high low method?
find the highest and lowest motnh of preduction
find the difference in costs
divide by the additional use to find the variable costs.
then subtract the high months cost with the volume times the vairavke to find the fixed.
what is the equation for the contribution margin? why is it called contribution margin?
contribution margin = price per unit - variable costs per unit
its caled that because its how much it contributes to the fixed costs and then after they’re paid to our profits
Break even point?
The break-even point can be defined either as:
The point where total sales revenue equals total expenses (variable and fixed).
The point where total contribution margin equals total fixed expenses.
contribution margin ratio equation?
margin ratio equation = contrinution margin / sales per price per unit
contribution margin ratio?
The break-even point can be defined either as:
The point where total sales revenue equals total expenses (variable and fixed).
The point where total contribution margin equals total fixed expenses.
what are the two eaquations for break even point?
at breka even piunt profit equals zero
Profits = Sales – (Variable expenses + Fixed expenses)
Sales = Variable expenses + Fixed expenses + Profits
whata are the three equations in the contribution margin method for break even point?
Break-even point in units sold
= Fixed expenses
—————————————–
Unit contribution margin
Break-even point in
Pounds (£)
CM ratio
or
Breakeven units x Selling price per unit
what does Cvp stand for?
cvp stands for Cost-volume-profit
on a cvp graph where is the break even point?
on a cvp graph the break even point is whwere the sales and total expenses cross.
