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40 Cards in this Set
- Front
- Back
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equation for equivalent units
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equivalent units = # of physical units x % complete
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# of units completed is the sum of two numbers..
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beginning WIP and started & completed
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equation for cost per unit using average method
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(costs of beg. WIP + costs incurred this period) / (# of units completed + equiv. units in end. WIP)
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total costs to account for =
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cost of beg WIP + costs incurred throughout period
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a fixed cost that management can quickly change in the short run
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discretionary
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a fixed cost that management cannot easily change in the short run
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committed
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what does y represent
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total costs
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what does x represent
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# of units (activity level)
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what does m represent
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variable cost per unit
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what does b represent
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total fixed costs
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a high r squared value means
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the data is correlated and we should trust predictions
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high low method is based on
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activity level NOT COSTS
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difference between absorption costing and variable costing
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Fixed MOH
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when are period costs expensed
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the period in which it is incurred
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changing the # of units produced affects Net Income in which method
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absorption costing
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if sales > production, absorption will have a...
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higher income
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if sales < production, absorption will have a...
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lower income
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profit equation
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sales price(x) - variable cost per unit(x) - total fixed costs = profit
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contribution margin ratio equation
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CM/sales revenue
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breakeven in units #
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(fixed costs + op.inc.) / cm/unit
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breakeven in dollars $
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(fixed costs + op.inc.) / cm ratio
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what happens to the breakeven point if.. fc increase
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increases
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what happens to the breakeven point if.. fc decrease
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decreases
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what happens to the breakeven point if.. sales price increases
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decreases
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what happens to the breakeven point if.. sales price per unit decreases
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increases
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what happens to the breakeven point if.. vc/unit increase
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increases
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what happens to the breakeven point if.. vc/unit decrease
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decreases
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what happens to the breakeven point if.. cm/unit increases
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decreases
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what happens to the breakeven point if.. cm/unit decreases
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increases
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sales mix use the _____ method to find CM
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weighted average
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difference between company's projected sales revenue over breakeven revenue
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margin of safety
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margin of safety % =
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margin of safety/expected sales
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companies with mostly FC have ____ risk
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HIGH
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operating leverage factor =
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CM/op.inc.
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target cost =
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market price - desired profit
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what do we do if actual costs are greater than target costs?
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increase sales volume
change product mix -sell more high CM products differentiate products -can charge higher price |
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cost plus price =
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cost + desired profit
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price takers: typical products, a lot of competition
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emphasizes target costing for pricing
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price setters: unique products, little competition
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emphasizes cost plus costing for pricing
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should we process it further?
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if incremental revenue > incremental costs
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