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13 Cards in this Set
- Front
- Back
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Traditional IS |
Sales Rev - COGS _________________ Gross Profit - Selling G&A __________________ Operating Income |
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Contribution Margin IS |
Sales Rev - Variable Costs __________________ Contribution Margin - Fixed Costs __________________ Operating Income |
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Variable cost Behavior |
VC Total: Change in direction proportion to change in volume VC Per unit: VC are set. DO NOT change within relevant range |
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Fixed Cost behavior |
FC Total: FC are set. DO NOT change within relevant range FC Per unit: Change inversely with change in volume |
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Mixed Costs
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MC ( Total costs)= FC + VC *HI-LO method: Y= FC total + (VC per unit X Q) HI cost - Lo cost _________________ Hi Q - Lo Q |
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Contribution Margin |
-Amount of revenue "left over" to cover FC and generate profit -CM= sales revenue- variable costs -CM Ratio: CM ______________ Sales revenue |
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Cost volume profit analysis. |
1. Equation approach: Operating Income= Sales rev - VC total - FCtotal -- OI= (sp x Q) - (VC/ unit x Q) - FCtotal 2. CM approach: Required sales in units: (FCtotal + Target Profit) _______________________ (Contribution Margin) 3. CM Ratio approach: Required sales in dollars: (FCtotal + Target Profit) _______________________ (CM Ratio) |
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Margin of Safety |
MOS= Expected sales - Break even sales - Units: 5000 - 3000= 2000 units - Dollars: 5000 x $5 - BE sales= - Ratio: MOS/ BE sales= xx.x % |
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Operating Leverage |
Cost structure: How much FC vs VC doe firm incur to operate business -Impacts how changes in business environment can change costs. Deg of OL= CM / Operating Income |
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Sales Mix |
-Products that make up total sales. SP - Weighted CM= Total CM / Total Units - vc _____ CM x Sales Mix ____________ Total CM |
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Absorption vs Variable Costing |
Absorption: Records fixed MOH Variable: DOES NOT record fixed MOH |
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Production > Sales |
-Absorption costing assigns some FIXED COSTS to ENDING INVENTORY vs variable costing is expensing all/ total fixed MOH immediately -operating income is GREATER under absorption costing |
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EXAMPLE |
SP $5.00 DM $1.00 DL $ .75 Var MOH $ .25 Fixed MOH $1.25 ___________________ Variable : $7.00 Absorption: $8.25 |
