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19 Cards in this Set
- Front
- Back
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IS A SET OF ANALYTICAL TOOLS USED TO DETERMINE THE REV REQUIRED TO REACH ANY DESIRED PROFIT LEVEL (BREAKEVEN) |
CVP ANALYSIS (COST-VOLUME-PROFIT) |
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costs that simultaneously benefit two or more operated departments. |
joint costs |
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When joint costs exist, the breakeven point cannot be determined by operated department. However, it can still be determined for the entire operation. |
*REMEMBER
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ADDRESSES THE SENSITIVITY OF THE DEPENDENT VARIABLES TO CHANGES IN ONE OR MORE OF THE INDEPENDENT VARIABLES. |
SENSITIVITY ANALYSIS |
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GENERALLY ITEMS SUCH AS ROOM SALES OR FOOD AND BEV SALES |
DEPENDENT VARIABLES |
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ITEMS SUCH AS VARIABLE COSTS AND SELLING PRICES. |
INDEPENDENT VARIABLES |
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THE AMOUNT AVAILABLE FOR EACH UNIT SOLD TO COVER FIXED COSTS/CONTRIBUTE TOWARD PROFITS. |
CONTRIBUTION MARGIN |
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REPRESENTS THE AMOUNT OF EACH DOLLAR OF SALES THAT IS CONTRIBUTED TOWARD FIXED COSTS AND/OR PROFITS. |
CONTRIBUTION MARGIN RATIO |
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IS THE EXTENT TO WHICH AN OPERATION'S EXPENSES ARE FIXED RATHER THAN VARIABLE. |
OPERATING LEVERAGE |
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THE MORE HIGHLY LEVERED THE OPERATION, THE GREATER THE RISK. HOWEVER, THE GREATER THE RISK, THE GREATER THE POTENTIAL RETURNS. |
REMEMBER |
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WHICH OF THE FF FUTURE COSTS ARE IRRELEVANT? LABOR? SUPPLIES? UTILITIES? REPAIRS? ALL OF THE ABOVE? |
SUPPLIES |
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WHICH IS AN ASSUMPTION OF THE CVP ANALYSIS? A. FIXED COSTS REMAIN FIXED FOR THE PERIOD BEING CONSIDERED. B. VARIABLE COSTS FLUCTUATE IN A LINEAR FASHION WITH REVENUES DURING THE PERIOD UNDER CONSIDERATION. C. REVENUES ARE DIRECTLY PROPORTIONAL TO VOLUME THAT IS, THEY ARE LINEAR. D. ALL OF THE ABOVE E. ONLY A AND C |
ALL OF THE ABOVE |
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IS THE EXTENT TO WHICH AN OPERATION'S EXPENSES ARE FIXED RATHER THAN VARIABLE. |
OPERATING LEV |
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MANAGERS USE____ AS AN ANALYTICAL TOOL TO EXAMINE THE RELATIONSHIPS AMONG COSTS, REV, AND SALES VOLUME. |
COST VOLUME PROFIT ANALYSIS |
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____IS THE EXCESS OF BUDGETED OR ACTUAL SALES OVER SALES AT BREAKEVEN |
MARGIN OF SAFETY |
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ON THE TWENTIETH DAY OF THE MONTH, ROOM SALES AT THE MOTOR LOFGE MOTEL EXCEEDED ITS BREAKEVEN POINT FOR THE MONTH. REVENUE GENERATED BY ROOM SALES DURING THE REMAINING DAYS OF THE MONTH WILL: =DECREASE IN PROPORTION TO THE ADDITIONAL ROOM SALES. =COVER THE FIXED COSTS ASSOCIATED WITH THOSE ADDITIONAL ROOM SALES. =BE PURE PROFIT FOR THE MOTEL. =INCREASE AT A FASTER RATE THAN THE COSTS ASSOCIATED WITH THOSE SALES. |
INCREASE AT A FASTER RATE THAN THE COSTS ASSOCIATED WITH THOSE SALES. |
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WHICH IS NOT A COMMON ASSUMPTION IN CVP ANALYSIS? =REV VARY INDIRECTLY WITH VARIABLE COSTS. =FIXED COSTS REMAIN CONSTANT DURING THE TIME SPAN CONSIDERED. =MIXED COSTS CAN BE PROPERLY DIVIDED INTO THEIR FIXED AND VARIABLE ELEMENTS. =ALL COSTS CAN BE ASSIGNED TO INDIVIDUAL OPERATED DEPT. |
REV VARY INDIRECTLY WITH VARIABLE COSTS. |
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IF AN OPERATION HAS A HIGH LEVEL OF FIXED COSTS RELATIVE TO VARIABLE COSTS; IT HAS: =RESTRUCTURE DEBT SERVICE =BREAKEVEN LEVERAGE =LOW OPERATING LEVERAGE =HIGH OPERATING LEVERAGE |
HIGH OPERATING LEVERAGE |
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IN THE CASE OF AN OPERATION WITH LOW OPERATING LEVERAGE, A RELATIVELY SMALL INCREASE IN SALES BEYOND THE BREAKEVEN POINT RESULTS IN: =A RELATIVELY SMALL INCREASE IN NET INCOME =A RELATIVELY LARGE INCREASE IN NET INCOME =A HIGH LEVEL OF FIXED COSTS =A DECREASE IN TOTAL VARIABLE COSTS |
A RELATIVELY SMALL INCREASE IN NET INCOME |
