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BEC - My own > Strategic Planning > Flashcards

Strategic Planning Flashcards

1
Q

What is the breakeven point?

A

The point a which revenues equal total costs

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2
Q

What is the total cost formula?

A

Total cost = fixed cost + (variable cost per unit x volume)

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3
Q

The contribution approach is also known as what?

A

Variable costing or direct costing

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4
Q

What is the contribution approach formula?

A 
Revenue
less: variable cost 
= Contribution margin
less: fixed costs
= Net Income
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5
Q

What is the unit contribution margin?

A

The unit sales price minus the unit variable cost

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6
Q

What is the contribution margin ratio?

A

The contribution margin expressed as a percentage of revenue

Contribution margin / revenue

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7
Q

What financial reporting approach is required under US GAAP?

A

The absorption approach

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8
Q

What is the absorption approach formula?

A 
Revenue
less: COGS  
= Gross margin
less: operating expenses 
= Net income
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9
Q

What is the major difference between the contribution approach and the absorption approach?

A

The treatment of fixed factory overhead.

Absorption method : Fixed manuf OH = Product cost (only expense the portion related to unit sold)

Contribution margin method: Fixed manuf. OH = Period cost (expense 100%)

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10
Q

What is breakeven analysis?

A

A determination of the sales required to achieve zero profit or loss

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11
Q

What is the breakeven point in units formula?

A

Total fixed costs / contribution margin per unit

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12
Q

What is the contribution margin per unit formula?

A

Unit price x breakeven points in units

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13
Q

What is the contribution margin ratio formula?

A

Total fixed costs / contribution margin ratio

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14
Q

What is the basic formula for target profit?

A

(Fixed cost + profit) / Contribution margin ratio

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15
Q

What is the formula for the target breakeven point in sales?

A

Sales = Variable costs + fixed costs + target profit before tax

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16
Q

What is the margin of safety?

A

The excess of sales over breakeven sales

17
Q

What is the target cost computation?

A

Market price - required profit

18
Q

When is the operational decision method(marginal analysis) used?

A

When analyzing business decisions. It focuses on the relevant revenues and costs associated with that decision.

19
Q

What are incremental costs(differential or out of pocket costs)?

A

Additional costs incurred to produce an additional amount of the unit

Also known as Prime cost

20
Q

What are sunk costs?

A

Unavoidable costs that were incurred in the past and cannot be recovered as a result of a decision

21
Q

What are opportunity costs?

A

The cost of foregoing the next best alternative when making a decision

22
Q

What are controllable costs?

A

A cost that a specific level of management is responsible for

23
Q

What are marginal costs?

A

The sum of all costs required for a one unit increase in activity

24
Q

What costs make up marginal costs?

A

All variable costs and any avoidable fixed costs

25
Q

What are special order decisions?

A

Opportunities that require a firm to decide if a specially priced order should be accepted or rejected

26
Q

When should a special order be accepted if there is excess capacity?

A

If the selling price per unit is greater than the variable cost per unit

27
Q

What are joint costs?

A

The costs of a single process that yields multiple products

28
Q

What are separable costs?

A

Costs incurred after the split off point

29
Q

What is sensitivity analysis?

A

The process of experimenting with different parameters and assumptions regarding a model and cataloging the results

30
Q

What is linear regression?

A

A method for studying the relationship between two or more variables

31
Q

What is regression analysis?

A

An explanation for variation in a dependent variable as a linear function of one or more independent variables

32
Q

What does the coefficient of correlation measure?

A

The strength of the linear relationship between the independent variable and dependent variable

33
Q

What does the coefficient of determination measure?

A

The proportion of the total variation in the dependent variable explained by the independent variable

34
Q

What is a learning curve analysis?

A

A step by step method of logically projecting costs when learning is a variable

35
Q

What is the high low method?

A

A technique used to estimate the fixed and variable portions of cost

BEC - My own (11 decks)

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