# Ch 9

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1. Break-even analysis
A technique to analyze the relationship among revenues, costs, and volume. It is also called cost-volume profit or CVP analysis
2. Relevant Range
The range of activity over which total fixed costs or per unit variable cost (or both) do not vary.
3. Fixed costs
Costs that stay the same in total over the relevant range but change inversely on a per unit basis as activity changes
4. Step-fixed costs
Costs that increase in total over wide, discrete steps
5. Variable costs
Costs that stay the same per unitÂ  but change directly in total with a change in activity over the relevant range. Total variable cost= Variable cost per unit X Number of units of activity
6. Target Costing
Controlling costs, decreasing profit margins, or both to meet or beat a predetermined price or reimbursement rate
7. Break-even point
The point where total revenues equal total costs
8. Contribution Margin Per unit
Per unit revenue minus per unit variable costs
9. Incremental Costs
Additional costs incurred solely as a result of an action or activity or a particular set of actions or activities
10. Total contribution Margin
Total revenues minus total variable costs
11. Contribution Margin Rule
If the contribution margin per unit is positive and no other additional costs will be incurred, then it is in the best financial interest of the organization to continue to provide additional units of that service even if the organization is not fully covering all of its other costs. On the other hand, if it is negative it is not in the best interest of the organization
12. Avoidable Fixed cost
A fixed cost that is avoided if a service is not provided. Example: Full-time nursing costs save if a service were closed
13. Nonavoidable Fixed Costs
A fixed cost that will remain even if a particular service is discontinued. Example: Full-time nursing costs in an organization that will continue, even though one of several services is dropped
14. Common Costs
Costs that benefit a number of services shared by all. Example: rent, utilities, and billing. Also called joint costs
15. Product Margin
Total contribution margin - Avoidable fixed costs. It represents the amount that a service contributes toward covering all other costs after it has covered the costs that are there solely because the service is offered (its total variable cost and avoidable fixed costs) and would not be there if the service were dropped
16. Product Margin Decision Rule
If a service's product margin is positive, the organization will be better off financially if it continues with the service, ceteris paribus. Conversely, if a service's product margin is negative, the organization will be better off financially if it discontinues the service, ceteris paribus
 Author: Anonymous ID: 257570 Card Set: Ch 9 Updated: 2014-01-20 22:59:41 Tags: H353 Folders: Description: h353 CH 9 cards Show Answers: