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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
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  5. Contribution Margin Ratio
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    • 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
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    • At Break-even Point, Profits = 0
    • Therefore: Sales= Var Ex. + Fix Ex.
  7. Break even, Contribution Method
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  8. Target Profit Analysis
    • Can use equation method and put wanted profit in instead of 0
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  9. Margin of Safety
    • Excess of budgeted ( or actual) sales dollars over the break-even volume of sales dollars.
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    • 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
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  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
Card Set:
2011-04-13 21:25:24

ACCT Chap 6,7,12,13
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