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.