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36 Cards in this Set
 Front
 Back
Contribution Income Statement

Sales
Variable Costs =Contribution Margin Fixed Costs =Income from operations 

Contribution Margin

Sales less variable cost of goods sold and variable selling and administrative expenses.


Contribution Margin Formula

Sales  Varabile costs = Contribution margin


Unit Contribution margin formula

Sales price per unit  variable costs per unit


Contibution Margin Ratiot

Indicates the percentage of each sales dollar available to cover the fixed costs and to provide income from operations


Contribution Margin Ratio Formula

(SalesVariable Costs)/Sales


Break Even Sales Point

The level of operations at which a business's revenues and expired costs are exactly equal. Revenues = Costs.


Break Even Sales (units) Formula

Fixed Costs / unit contribution margin


Target profit Formula

Sales(units)= (fixed costs+target profit) / (Unit contribution margin)


Profit Markup

Expressed as a percentage of cost. This percentage is then multiplied by the cost amount per unit. The dollar amount of the markup is then added to the cost amount per unit to arrive at the selling price.


Markup Percentage Formula

Desired profit / total costs
This number is expressed as a percentage. 

Markup per unit formula

desired profit/total costs = markup percentage, then total cost per calculator x percentage markup


Production Bottleneck

Occurs at the point in the process where the demand for the company's product exceeds the ability to produce the products. When a company has a bottleneck in its production process, it should attempt to maximize its profitability subject to the influence of the bottleneck. The correct measure of performance is the value of each bottleneck hour, or the contribution margin per bottleneck hour.


Rate of Return on Investment Formula

Income from operations / Invested Assets


Rate of Return on Investment (profit Margin) Formula

profit margin x investment turnover


Markup Percentage Formula

Desired profit / total costs
This number is expressed as a percentage. 

Markup per unit formula

desired profit/total costs = markup percentage, then total cost per calculator x percentage markup


Production Bottleneck

Occurs at the point in the process where the demand for the company's product exceeds the ability to produce the products. When a company has a bottleneck in its production process, it should attempt to maximize its profitability subject to the influence of the bottleneck. The correct measure of performance is the value of each bottleneck hour, or the contribution margin per bottleneck hour.


Rate of Return on Investment Formula

Income from operations / Invested Assets


Rate of Return on Investment (profit Margin) Formula

profit margin x investment turnover


Markup Percentage Formula

Desired profit / total costs
This number is expressed as a percentage. 

Markup per unit formula

desired profit/total costs = markup percentage, then total cost per calculator x percentage markup


Production Bottleneck

Occurs at the point in the process where the demand for the company's product exceeds the ability to produce the products. When a company has a bottleneck in its production process, it should attempt to maximize its profitability subject to the influence of the bottleneck. The correct measure of performance is the value of each bottleneck hour, or the contribution margin per bottleneck hour.


Rate of Return on Investment Formula

Income from operations / Invested Assets


Rate of Return on Investment (profit Margin) Formula

profit margin x investment turnover


Rate of Return on Investment (investment turnover) Formula

(Income from operations / Sales) x (Sales / Invested Assets)


Balanced Scorecard

A set of financial and non financial measure that reflect multiple performance dimensions of a business. A common balanced scorecard design measure performance in the innovation and learning, customer, internal, and financial dimensions of a business.


Innovation and Learning Perspective (balanced scorecard)

Measures the amount of innovation in an organization.


Customer Perspective (balanced scorecard)

Measure customer satisfaction, loyalty, and perceptions


Internal Perspective (balanced scorecard)

Measures the effectiveness and efficiencey of internal business processes.


Financial Perspective (balanced scorecard)

Measures the economic performance of the responcibility center.


Balanced Scorecard Purposes

Designed to revel the underlying nonfinancial drivers, or causes of financial performance. I helps managers consider tradeoffs between short and long term performance. 40% of companies use or are planning to use the balanced scorecard, thus it is gaining acceptance because of its ability to reveal the underlying causes of financial performance while helping managers consider the short and long term implications of their decisions.


Cash Payback Period

The expected period of time that will elapse between the date of the capital expenditure and the complete recovery in cash (or equivalent) of the amount invested. The time required for the net cashflow to equal the initial outlay for the fixed asset is the payback period.


Cash Payback Period Formula

Fixed Asset / Annual net cash flows: annual cash revenueannual cash expense.


Cash Payback Method Benefits

Widely used in evaluating proposals for investments in new projects. A short payback period is desirable because the sooner the cash is recovered, the sooner it becomes available for reinvestment. Also reduces outside risks when payback period is short. This method is especially useful to managers whose primary concery is liquidity.


Casg Payback Method Deficiencies

The cash payback method is that is ignores cash flows occuring after the payback period. In addition, the cash payback method does not use present value concepts in valuing cash flows occuring in different periods.
