Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
14 Cards in this Set
- Front
- Back
|
Why is cost important 4 |
1) informs pricing decisions especially in the marketing department where marketing managers will use cost data to help inform their pricing methods 2) allows comparison 3) key factor in determining profits 4) helps sets budgets and targets |
|
|
Def of direct costs |
These are cots that can be clearly identified with each unit of production and can also be allocated in a cost center |
|
|
Def of indirect cost |
Costs that cannot be identified with each unit of production or allocated accurately to a cost center |
|
|
Def of fixed costs |
Costs that do not have with output in the short run |
|
|
Def of variable costs |
Costs that vary with output |
|
|
Why can classifying cost be difficult |
Write later |
|
|
Are direct costs, variable costs |
Direct costs are simply but not the same as variable costs. For example if a hotel buys a new juicing machine for the bar department, this is a direct costs to that department but the costs of the machine will not vary with the number of orange juice served |
|
|
What's break even |
The level of output at which total costs equal total revenue. Theregore neither a profit nor a loss us made |
|
|
Def of margin of safety |
The amount by which sales level exceeds the break even level of output |
|
|
Formula of rbeak even level of output |
Fixed costs / contribution per unit |
|
|
What's contribution per unit |
Selling price less variable costs per unit |
|
|
Advantages of break even 5 |
1) charts are easy to construct and interpret and it gives a precise break even result 2) provides guidelines to management on break even points,safety marketing ajdnprofut or loss levels at different rates of output 3) comparisons Can be made betwee n diffebt oprion by constructing new charts to show 4) can be used to assist managers when taking important decisions uch as location decisions, whether to buy new equipment 5) |
|
|
Disadvantages of break even 4 |
1) not all costs can be classified into fixed and variable costs. The introduction of semivariable costs will make the technique much more complicated 2) no allowance made for inventory. It is assumed all units produces are sold. 3) as well fixed costs are unlikely to remain constant at different output levels to maximum capacity 4) the assumption that costs and revenue are always represented by straight lines is unrealistic. Not all variable costs change directly with output. For example layout costs may increase as output reached maximum due to higher shift payments. |
|
|
Is break even always accurate in the long run ? |
Break even chart is only accurate for a limited peruod of time because see cost changes or market condition that |
