# ACCT3

 The flashcards below were created by user lisrosey on FreezingBlue Flashcards. Cost-Volume Profit Analysis Focus on how profits are affected by:Selling priesSales volumeUnit variable costsTotal fixed costsMix of product sold Contribution Margin approach Sales revenue - all variable expensesIt is the amount available to cover fixed expenses and then to provide profits for the periodUnit contribution margin stays constant as long as selling price and unit variable cost do not change Break-Even Point Level of sales where profit is 0When sales renenue equals total expenses (v and f)Total contribution margin = total fixed expenses CVP Graph Contribution Margin Ratio The percent you recieve from this ratio represents how much a change in sales will effect contripution margin and net income Break even, Equation Method At Break-even Point, Profits = 0 Therefore: Sales= Var Ex. + Fix Ex. Break even, Contribution Method Target Profit Analysis Can use equation method and put wanted profit in instead of 0 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 Operating Leverage Meausure how a given percentage change in sales affects net operating incomeIt acts as a multiplier: degree of leverage x % change in salesDegree changes with level of sales Absorption Costing (Full cost) Treats all Manufacturing costs as product costs, regardless of whether they are variable or fixedConsists of DM, DL, and both V and F OHProduces highest values for WIP and FG inventories Variable Costing (direct or marginal) Only those manufacturing costs that vary with output are treated as product costs.Include DM, DL, and V of OHFixed is treated as period cost Production > Sales Inventory increasesAbsorbtion > Variable Production < Sales Inventory DecreasesAbsorbtion < Variable Production = Sales No changeAbsorbtion = Variable Authorlisrosey ID79408 Card SetACCT3 DescriptionACCT Chap 6,7,12,13 Updated2011-04-13T21:25:24Z Show Answers