gp.11

what is the breakeven formula?

(fixed costs + target profit)/contribution margin = required units

what is probability analysis used for?

examine possible outcomes given different alternatives.

find contribution margin ratio with variable cost = %sales. find breakeven sales with fixed cost given with variable cost = %sales.

first. contribution margin ratio is 1-%sales if %sales is the variable cost%. second, find breakeven sales dollars by : fixed cost/ contribution margin ratio

calculate the breakeven sales

fixed costs/contribution margin ratio

when calculating selling price before/after splitoff what do I use for pricing?

joint cost per unit, further costs per unit and gross margin (which is the alternative price-alternative cost)

1/multiplier is what?

marginal propensity to save

Learning curve cumulative avg. time # of units per unit 1 2 4

reductions occur after following 2nd unit.

allocated fixed costs are not used to calculate the breakeven units. true or false?

true

as inventory increases, absorption costing produces greater income than variable costing. true or false?

true

contribution margin is the excess of revenues over all variable costs. true or false?

true

in an absorption costing system, no selling and administrative expenses are put into product costs, true or false?

true

income under stockholders equity is lower under absorption than variable. true or false?

true

shipping costs are period costs under absorption. true or false?

true

true or false. the difference between variable costing and absorption costing is the treatment of fixed manufacturing costs.

true

true or false: contribution margin calculation requires use of fixed mfg oh and fixed sga.

true

under variable costing, mfg.var is included in inventory but var. selling is not. true or false?

true

variable costing approach total contribution margin requires all variable information and nothing else. true or false?

true

did you know that absorption costing raises profits, and encourages larger inventories?

use variable costing to encourage managers to reduce inventory

variable costing income statement net sales (variable costs) CM (fixed costs) operating income

variable costing income statement net sales (variable costs) CM (fixed costs) operating income

when computing the breakeven point, do we include the administrative costs?

yes

calculate the margin of safety

current sales- breakeven sales

find contribution margin with breakeven sales and contribution margin rate.

breakeven sales x contribution margin rate is the contribution margin.