Term
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Definition
| a cost that results from an organization's ownership or use of facilities and its basic organization structure |
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Term
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Definition
| A cost that results from a discretionary management decision to spend a particular amount of money. (i.e. charity, advertisements, worker training) |
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Term
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Definition
sales - full cost of goods (fixed AND variable)
NOTE: this will not be included on a Contribution Margin income statement |
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Term
| How do you calculate COST PER UNIT? |
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Definition
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Term
| How do you calculate VARIABLE COST PER UNIT? |
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Definition
| Variable cost per unit = Total Variable Costs/Units |
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Term
| How do you calculate TOTAL VARIABLE COSTS? |
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Definition
| Total variable costs = Variable cost per unit x # of units |
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Term
| How do you calculate FIXED COST PER UNIT? |
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Definition
| Total Fixed Cost/Volume = Fixed cost per unit |
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Term
| What happens to Fixed Cost per Unit as volume Increases? |
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Definition
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Term
| How do you calculate TOTAL COST? |
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Definition
| Total cost = Total Fixed + Total Variable |
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Term
| In finding the Contribution Margin, What factors do you need to consider? |
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Definition
Price - Variable Cost = CM
*Use units and Total |
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Term
| Does variable costs per unit change? |
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Definition
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Term
| How do you calculate TOTAL FIXED COSTS? |
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Definition
| Total Fixed costs = (units produced x FC per unit) / Units produced |
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Term
| What is the formula for the "High-Low method"? |
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Definition
1)Variable cost per unit = ($ for high - $ for low)/(High volume - Low volume)
2)Total cost = Fixed cost + VC per unit(#unit)
3)Total Cost = Fixed cost + Variable(x units)
NOTE: Use the HIGH point for Total cost in step 2 |
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Term
| What are the 5 cost estimate problems? |
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Definition
1. Data may be missing
2. Outliers
3. Mismatched time periods
4. fixed costs may appear to be variable due to allocation
5. inflation |
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Term
| How do you find the COST EQUATION? |
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Definition
| It is the 3rd step in the "high-low" method. |
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Term
What are three methods used to separate mixed cost into the fixed and variable components?
Which is most accurate? |
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Definition
1. High-Low
2. Visual Fit
3. Least squares regression* -most accurate |
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Term
| How do you calculate the CONTRIBUTION MARGIN? |
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Definition
| Contribution margin = Sales - Variable cost |
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Term
| How do you calculate NET INCOME? |
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Definition
| Net income = Contribution - Fixed |
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Term
| How do you calculate the BREAK-EVEN POINT IN UNITS? |
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Definition
| UNITS = (Total Fixed + Net income) / (Price unit - Variable Cost per unit) |
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Term
| How do you calculate BREAK EVEN POINT IN SALES DOLLARS? |
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Definition
| Break even point ($) = BE point in Units x price unit |
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Term
| What is the Degree of Operating Leverage? |
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Definition
| Dollar = (Total Sales - Total Variable Cost) / (Total Sales - Total Variable Cost - Total Cost) |
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Term
| How do you calculate the Margin of Safety? |
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Definition
| Current volume - Break even volume = Margin of Safety |
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Term
| How do you calculate the Margin of Safety? |
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Definition
| Current volume - Break even volume = Margin of Safety |
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Term
| How do you calculate PRODUCTION UNITS? |
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Definition
| Production units = Sales units - begin + end |
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