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26 Cards in this Set

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Cost behavior
The manner in which a cost changes as a related activity changes.
Activity base
The activities that are thought to cause the cost to be incurred
Relevant range
The range of activity over which the changes in the cost are of interest
Variable Costs
costs that vary in proportion to changes in the level of activity.
Contribution margin
excess of sales revenues over variable costs.
Volume Ratio/contribution margin ratio
the percentage of each sales dollar available to cover the fixed costs and to provide income from operations.
what is the contribution margin ratio
sales - variable costs/ sales
Total Variable Costs
vary in proportion to changes in the level of activity
Unit Variable Costs
Remain the same regardless of activity level
What are examples of Variable costs
Direct materials and Direct labor
Total Fixed costs
remain the same as the level of acitvity changes
Unit Fixed costs
change as activity levels change
Examples of fixed costs
depreciation of factory equipment, insurance on factory plant, and superviors' salary
Mixed Costs
have the characteristics of bothe variable cost and a fixed cost
**graph goes straight and angled
Breakeven point
is the place where Revenues = expenses and there is no profit
Breakeven point formula
Fixed costs/unit contribution Margin
Unit contribuion equation
unit selling price/unit variable cost
If you own a bakery that has a fixed cost of 700 and a unit contribution margin of $2 on each loaf of bread you sell, then you must sell..
700/2=350 loaves of bread ot break even
Traditional Income statement
**sorts by type**
Sales-cost of good=
gross profit
-Operating expenses=
Income from operations
Contribution Margin Income Statement
**Sorts by cost behavior**
Sales-variable costs=
Conrtibution Margin-
Fixed Costs=
Income from operations
What happens to BEP if fixed cost increases
Break even point increases
What happens when variable cost increases
BEP increases
what happend when sales price increases?
BEP decreases
Target Profit
Sales in unites=(fixed costs + target profit)/unit contribution margin
Differential revenue
the amount of increase or decrease in revenue expected in the future because of one course of action compared with an alternative
Differential Costs
the amount of increase or decrease in costs expected because of the choices you made