Week 10 - Cost And Break-even Analysis Flashcards
What are key points with financial accounting?
Reports on past events
Highly regulated
Detailed annual financial statements
Follows set format for statements.
What is the key points of management accounting?
Often involves planning for the future
Not regulated (however guidelines are set by professional bodies)
Frequent management accounting reports
No pre-set and often detailed reports
What would be a good definition of management accounting?
It is the provision of information to internal managers for planning decision-making and control.
What are variable costs?
Variable costs vary directly with the number of units produced. For an example, the cost of materials in making a product would be a variable cost.
What are fixed costs?
These are those costs that remain the same whatever the level of output (over a limited range of output). For example, rent payable will be unchanged regardless of the number of units produced.
What are semi-variable costs?
These are the costs that contain both a fixed and variable element. For example, telephone charges may include a fixed rental cost-plus a charge linked to telephone usage.
What are step-fixed costs?
These are costs that will remain fixed as output increases until activity reaches a level where the costs have to increase sharply. For example, supervision costs where an additional supervisor is required once a certain level of output is exceeded.
What is contribution?
Contribution is defined as the difference between the selling price of a product and the variable costs incurred in producing that product.
What is the break-even point?
The break-even point is where neither profit nor a loss is made
How do you work out break-even (in units)
Fixed costs| contribution per unit
What’s is the margin of safety?
It is used to describe the difference between the break-even point and the anticipated level of output.
