# ACCT3

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 Author: lisrosey ID: 79408 Filename: ACCT3 Updated: 2011-04-13 17:25:24 Tags: ACCT Test Folders: Description: ACCT Chap 6,7,12,13 Show Answers:

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1. Cost-Volume Profit Analysis
• Focus on how profits are affected by:
• Selling pries
• Sales volume
• Unit variable costs
• Total fixed costs
• Mix of product sold
2. Contribution Margin approach
• Sales revenue - all variable expenses
• It is the amount available to cover fixed expenses and then to provide profits for the period
• Unit contribution margin stays constant as long as selling price and unit variable cost do not change
3. Break-Even Point
• Level of sales where profit is 0
• When sales renenue equals total expenses (v and f)
• Total contribution margin = total fixed expenses
4. CVP Graph
5. Contribution Margin Ratio
• The percent you recieve from this ratio represents how much a change in sales will effect contripution margin and net income
6. Break even, Equation Method
• At Break-even Point, Profits = 0
• Therefore: Sales= Var Ex. + Fix Ex.
7. Break even, Contribution Method
8. Target Profit Analysis
• Can use equation method and put wanted profit in instead of 0
9. Margin of Safety
• Excess of budgeted ( or actual) sales dollars over the break-even volume of sales dollars.
• For percentge: Margin of safety in dollars/ Total sales
10. Operating Leverage
• Meausure how a given percentage change in sales affects net operating income
• It acts as a multiplier: degree of leverage x % change in sales
• Degree changes with level of sales
11. Absorption Costing (Full cost)
• Treats all Manufacturing costs as product costs, regardless of whether they are variable or fixed
• Consists of DM, DL, and both V and F OH
• Produces highest values for WIP and FG inventories
12. Variable Costing (direct or marginal)
• Only those manufacturing costs that vary with output are treated as product costs.
• Include DM, DL, and V of OH
• Fixed is treated as period cost
13. Production > Sales
• Inventory increases
• Absorbtion > Variable
14. Production < Sales
• Inventory Decreases
• Absorbtion < Variable
15. Production = Sales
• No change
• Absorbtion = Variable

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