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In the cvp chart, explain BE pt, cont marg, NI & NL.
BE = Total cost & sales intersectCont Marg = Sales line over variable costs lineNI = Past BE ptNL = Below BE pt
Example of percentage markup on cost.
Want to sell a product at a gross margin of 20%. The cost of the product is $4.00.% markup = 20% / 100% - 20% so = 25%Selling price = Cost of product + GM so 4.00 + 25%(4.00) = 5.00
Does COGM replace purchases of a merchandising firm?
Yes! Finished Goods = EI
The experience curve is the graphic representation of time (& costs) for a broad category of tasks decreasing as a group gains experience with a set of tasks.
What are the 2 common approaches to product pricing?
Cont Margin Approach & Cost Plus Pricing
What are step variable costs?
ex. supervision may be fixed over a given production volume, but additional shifts or work crews may be needed to increase production therefore additional supervisors are needed & thus the added cost will go up in a lump sum or "stair step" manner!
Explain the cost-plus pricing approach in product pricing.
Takes the products costs & adds a predetermined markup to compute the targeted selling price.
What's in the FG inventory acct?
Beg Bal + Goods Finished (from WIP) = Avail for Sale - COGS = Ending Bal
What's in raw mat'ls inventory acct?
Beg Bal + Purchases = Available for use - RM used (transferred to WIP) = Ending Balance
Contribution marg method of BE pt in $ & units.
FC + NI / Cont Marg RatioFC + NI / UCMCont Marg is always in den!
Explain how the diff (variance) btw actual OH & applied OH is reported?
Usually reported as an adj to COGS in the I/S!
In mixed sales, how would you get the BE point for each product?
Composite Units x sales mix ratio = BE UnitsBE Units x selling price = BE $