# Shared Flashcard Set

## Details

Exam #2 Managerial Acctg
n/a
24
Accounting
03/22/2011

Term
 Committed Cost
Definition
 a cost that results from an organization's ownership or use of facilities and its basic organization structure
Term
 Discretionary Cost
Definition
 A cost that results from a discretionary management decision to spend a particular amount of money. (i.e. charity, advertisements, worker training)
Term
 Gross Margin
Definition
 sales - full cost of goods (fixed AND variable)NOTE: this will not be included on a Contribution Margin income statement
Term
 How do you calculate COST PER UNIT?
Definition
 \$/units = Cost per unit
Term
 How do you calculate VARIABLE COST PER UNIT?
Definition
 Variable cost per unit = Total Variable Costs/Units
Term
 How do you calculate TOTAL VARIABLE COSTS?
Definition
 Total variable costs = Variable cost per unit x # of units
Term
 How do you calculate FIXED COST PER UNIT?
Definition
 Total Fixed Cost/Volume = Fixed cost per unit
Term
 What happens to Fixed Cost per Unit as volume Increases?
Definition
 FC per unit goes down
Term
 How do you calculate TOTAL COST?
Definition
 Total cost = Total Fixed + Total Variable
Term
 In finding the Contribution Margin, What factors do you need to consider?
Definition
 Price - Variable Cost = CM*Use units and Total
Term
 Does variable costs per unit change?
Definition
 No, it stays constant.
Term
 How do you calculate TOTAL FIXED COSTS?
Definition
 Total Fixed costs = (units produced x FC per unit) / Units produced
Term
 What is the formula for the "High-Low method"?
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
Term
 What are the 5 cost estimate problems?
Definition
 1. Data may be missing2. Outliers3. Mismatched time periods4. fixed costs may appear to be variable due to allocation5. inflation
Term
 How do you find the COST EQUATION?
Definition
 It is the 3rd step in the "high-low" method.
Term
 What are three methods used to separate mixed cost into the fixed and variable components?Which is most accurate?
Definition
 1. High-Low2. Visual Fit 3. Least squares regression* -most accurate
Term
 How do you calculate the CONTRIBUTION MARGIN?
Definition
 Contribution margin = Sales - Variable cost
Term
 How do you calculate NET INCOME?
Definition
 Net income = Contribution - Fixed
Term
 How do you calculate the BREAK-EVEN POINT IN UNITS?
Definition
 UNITS = (Total Fixed + Net income) / (Price unit - Variable Cost per unit)
Term
 How do you calculate BREAK EVEN POINT IN SALES DOLLARS?
Definition
 Break even point (\$) = BE point in Units x price unit
Term
 What is the Degree of Operating Leverage?
Definition
 Dollar = (Total Sales - Total Variable Cost) / (Total Sales - Total Variable Cost - Total Cost)
Term
 How do you calculate the Margin of Safety?
Definition
 Current volume - Break even volume = Margin of Safety
Term
 How do you calculate the Margin of Safety?
Definition
 Current volume - Break even volume = Margin of Safety
Term
 How do you calculate PRODUCTION UNITS?
Definition
 Production units = Sales units - begin + end
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