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15 Cards in this Set

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What is contribution margin?

sales- variable costs = contribution margin

What is the contribution margin ratio?

cm/sales = contribution margin ratio = (cm/unit)/sales

What is BE in units?

BE units = Fixed costs/contribution margin per unit

What is BE in $?

FC/(CM/unit x SP) = FC/CM ratio

What is the equation for desired profit in units?

BE point + desired profit in units = (FC + desired profit)/CM per unit

What is the equation for desired profit in $?

BE point + desired profit in $= BE +desired profit (units x sales price per unit)

What are the three weaknesses of Breakeven?

1. Linearity (unlikely to be straight line but linear)


2. Relevant range (FC's varying step points)


3. Multi products (FC's tend to relate to more than one activity. Dividing among profits makes BE questionable)

What is the pre-determined overhead application rate? (POAR)

estimated total MOH/ estimated total units= POAR

What is manufacturing overhead?

- includes all manufacturing costs except raw materials and direct labour


- OH is an indirect cost that does not specifically relate to individual products

What is the product cost using variable costing?

product cost = raw materials + direct labour + variable manufacturing overhead

What is the product cost using absorption costing?

product cost= raw materials + direct labour + variable manufacturing overhead+ fixed manufacturing overhead

What factors need considering when making short term investment decisions?

- strategic reasons


- competitive reasons


- employees


- resources

How do you work out a flexed budget?

flexed budget= actual volume x std $

What are the four elements of the bsc?

1. financial


2. internal processes


3. customer perspective


4. learning and growth

What is the formula for a purchases budget?

Sales - opening inventory + closing inventory = purchases