Planning Techniques Forecasting and Projection Flashcards
What approach is used for internal decision making?
Contribution approach
Equation for contribution approach
Revenue-Variable costs=CM-FC=Net income
Calculation for CM
Sales price - Variable cost
Calculation for contribution margin ratio
Contibution margin / revenue
What approach is under US GAAP?
Absorption Approach
Equation for absorption approach
Revenue - COGS = Gross margin - Operating expenses = Net income
What type of cost is fixed factory overhead in the absorption approach?
Product cost
What type of cost is fixed factory overhead in the contribution approach?
Period cost
Calculation for Breakeven point in units
Total fixed costs / Contribution margin per unit
Calculation for Breakeven point in dollars
Total fixed costs / contribution margin ratio
Calculation for sales volume for target profit
(Fixed costs + profit) / Contribution margin ratio
Calculation for Margin of safety
Total sales - Breakeven sales
Calculation for margin of safety percent
Margin of safety in dollars / total sales
Accept Presumed Excess Capacity if?
Sales Price > Variable Costs
Accept Presumed Full Capacity if?
Sales Price > Variable Costs + Opportunity Costs
What is the contribution margin that would have been produced if the special order were not accepted?
Opportunity cost
What does marginal costs include?
All variable costs and any voidable costs
What types of costs are relevant?
Incremental and Opportunity
What is the simple linear regression model?
y=A+Bx
y=
Dependent variable(total costs)
A=
Y intercept(total fixed costs)
B=
Slope(Change in total costs)
x=
Independent variable(Total activity)
Calculation for High Low Method
Choose High and Low, Calculate difference between high and low, calculate VC per unit, Find total fixed costs
