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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