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20 Cards in this Set

  • Front
  • Back
What is the key difference between committed fixed costs and discretionary fixed costs?
Committed fixed costs cannot be cut for short periods of time.
What is the equation associated with mixed costs?
Y = a + bX - Where y equals the total mixed cost, a equals the total fixed cost, b equals the variable cost per unit of activity, and X equals the activity level.
How do you determine the variable cost when using the high-low method?
Variable cost = change in cost / change in activity.
What is the main advantage of the contribution format income statement?
It distinguishes between fixed and variable costs using the contribution margin - the amount remaining from sales after variable expenses have been deducted.
What will occur once the break-even point has been reached?
Net operating income will increase by the amount of the unit contribution margin for each additional unit sold.
How do you determine the unit cm?
Selling price per unit - variable expenses per unit = p - v.
What are the three equations that can be used to determine profit?
1. Profit = contribution margin (sales - variable expenses) - fixed expenses
2. Profit = (unit cm x q) - fixed expenses
3. Profit = (cm ratio x sales) - fixed expenses
How do you determine the contribution ratio?
Contribution margin / sales
Using target-profit analysis how would you determine the unit sales to attain a target profit?
(Target profit + fixed expenses) / unit cm
How would you determine (1) unit sales to break even and (2) dollar sales to break even?
1. Fixed expenses / unit cm
2. Fixed expenses / cm ratio
How would you determine the (1) margin of safety in dollars and (2) the margin of safety percentage?
1. Total budgeted (or actual) sales - break-even sales
2. Margin of safety in dollars / total budgeted of actual sales in dollars
What is the equation to find degree of operating leverage?
Contribution margin / net operating income
What two distinct purposes are budgets used for?
Planning and control
Responsibility accounting says that...?
Managers should be held responsible for those items, and only those items, that the manager can actually control to a significant extent.
What is a self-imposed or participative budget?
A budget that is prepared with the full cooperation and participation of managers at all levels.
How is the sales budget constructed?
By multiplying budgeted unit sales by the selling price.
What are the four major sections of the cash budget?
Receipts, disbursements, cash excess or deficiency, and financing.
In the production budget how are total needs for the first quarter determined?
By adding budgeted sales to desired ending inventory.
What is the equivalent of a production budget in a merchandising company?
A merchandise purchases budget which shows the amount of goods to be purchased from suppliers during the period.
In the direct labor budget, how is the direct labor requirement for each quarter computed?
By multiplying the number of units to be produced in that quarter by the number of direct labor hours required to make a unit.