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20 Cards in this Set
- Front
- Back
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What is the key difference between committed fixed costs and discretionary fixed costs?
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Committed fixed costs cannot be cut for short periods of time.
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What is the equation associated with mixed costs?
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Y = a + bX - Where y equals the total mixed cost, a equals the total fixed cost, b equals the variable cost per unit of activity, and X equals the activity level.
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How do you determine the variable cost when using the high-low method?
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Variable cost = change in cost / change in activity.
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What is the main advantage of the contribution format income statement?
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It distinguishes between fixed and variable costs using the contribution margin - the amount remaining from sales after variable expenses have been deducted.
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What will occur once the break-even point has been reached?
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Net operating income will increase by the amount of the unit contribution margin for each additional unit sold.
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How do you determine the unit cm?
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Selling price per unit - variable expenses per unit = p - v.
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What are the three equations that can be used to determine profit?
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1. Profit = contribution margin (sales - variable expenses) - fixed expenses
2. Profit = (unit cm x q) - fixed expenses 3. Profit = (cm ratio x sales) - fixed expenses |
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How do you determine the contribution ratio?
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Contribution margin / sales
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Using target-profit analysis how would you determine the unit sales to attain a target profit?
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(Target profit + fixed expenses) / unit cm
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How would you determine (1) unit sales to break even and (2) dollar sales to break even?
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1. Fixed expenses / unit cm
2. Fixed expenses / cm ratio |
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How would you determine the (1) margin of safety in dollars and (2) the margin of safety percentage?
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1. Total budgeted (or actual) sales - break-even sales
2. Margin of safety in dollars / total budgeted of actual sales in dollars |
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What is the equation to find degree of operating leverage?
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Contribution margin / net operating income
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What two distinct purposes are budgets used for?
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Planning and control
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Responsibility accounting says that...?
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Managers should be held responsible for those items, and only those items, that the manager can actually control to a significant extent.
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What is a self-imposed or participative budget?
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A budget that is prepared with the full cooperation and participation of managers at all levels.
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How is the sales budget constructed?
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By multiplying budgeted unit sales by the selling price.
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What are the four major sections of the cash budget?
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Receipts, disbursements, cash excess or deficiency, and financing.
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In the production budget how are total needs for the first quarter determined?
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By adding budgeted sales to desired ending inventory.
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What is the equivalent of a production budget in a merchandising company?
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A merchandise purchases budget which shows the amount of goods to be purchased from suppliers during the period.
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In the direct labor budget, how is the direct labor requirement for each quarter computed?
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By multiplying the number of units to be produced in that quarter by the number of direct labor hours required to make a unit.
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