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18 Cards in this Set
- Front
- Back
Cost Driver |
A variable that causes a cost |
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Variable Costs |
A variable cost is a cost that changes with the amount of activity in another variable. |
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Variable Cost Equation |
Variable cost = Variable cost per unit of the cost driver × Cost driver units |
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Variable Cost Per Unit |
The total amount of labor, supplies, shipping, and other direct costs that go into the production of one unit. |
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Variable Cost Per Unit Equation |
Variable cost per unit = Variable cost of material + Variable cost of labour + Variable cost of supplies + Variable cost of shipping + etc. |
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Fixed Cost |
A fixed cost is a cost that doesn't change in the short term or depends on the amount of resources consumed in the production of one unit. Fixed costs are called capacity-related costs. |
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Total Cost |
Total cost equal fixed costs plus variable costs |
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Total Cost Equation |
Total costs = Variable costs + Fixed costs |
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Cost-Volume-Profit Analysis |
Cost-volume-profit (CVP) analysis uses the concepts of variable and fixed costs to identify the profit associated with various levels of activities. |
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Revenue Equation |
Revenue = Selling price per unit × Number of units sold |
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Profit Equation |
Profit = Revenue - Total costs Profit = Revenue - Variable Costs - Fixed Costs Profit = Unit sales × (Price per unit - variable costs) - Fixed costs Profit = Contribution margin per unit × Units produced and sold - Fixed costs |
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Contribution Margin Per Unit |
The contribution the each unit makes to covering fixed costs and providing a profit |
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Contribution Margin |
The difference between total revenue and total variable costs |
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Contribution Margin Ratio |
The fraction of each sales dollar that is available to cover fixed expenses and contribute to profit |
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Contribution Margin Per Unit Equation |
Contribution margin per unit = Selling price per unit - Variable costs |
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Target Profit |
Units needed to be sold = (Target profit + Fixed cost) ÷ Contribution margin per unit |
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Break-even sales level |
The point where all costs are covered, but no profit is generated. In the equation, target profit = $0 |
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Break-even sales level equation |
Units needed to be sold = ($0 + Fixed cost) ÷ Contribution margin per unit |