Contribution Margin & CVP
This ratio is calculated as contribution margin divided by sales revenue.
What is the contribution margin ratio?
This type of cost remains constant in total regardless of activity level.
What is a fixed cost?
A cost that makes a difference between decision alternatives is called this.
What is a relevant or differential cost?
This budgeting approach is controlled primarily by senior management with limited lower-level input.
What is top-down budgeting?
Even with positive net income, cash may not increase because accounting uses this basis. (cash or accrual)
What is accrual accounting?
Fixed costs / Contribution Margin =
What is breakeven point?
In a coffee shop, rent is this type of cost, while coffee beans are this type of cost.
What are fixed costs and variable costs?
Costs that have already been incurred and cannot be eliminated are called these.
What are sunk costs?
This budgeting approach emphasizes collaboration and input from lower-level managers.
What is participative budgeting?
Managerial accounting primarily serves these users.
Who are internal managers?
With a selling price of $100 and variable costs of $40 per unit, this is the contribution margin per unit.
What is $60?
Additional marketing is considered this type of cost choice. (Committed or Discretionary)
What is discretionary?
In a special order decision with excess capacity, this type of manufacturing overhead is not relevant (fixed or variable).
What is fixed manufacturing overhead?
If market price is $160 and desired profit is $30, this is the target cost per unit.
What is $130?
Sales - COGS =
What is gross profit?
If fixed costs are $60,000 and the contribution margin ratio is 60%, this is the break-even point in sales $ dollars.
What is $100,000?
This is a Cost that represent foregone benefits. ie. excess cash not earning interest
What is opportunity cost?
Market price minus desired profit equals this.
What is Target Cost?
A manufacturer signs a 10‑year lease for factory space represents this type of cost.
What is committed cost?
The 4 primary financial statements are:
What is balance sheet, income statement, statement of changes in equity, and statement of cash flow.
A company has a 30% contribution margin ratio. If sales increase by $30,000, this is the increase in operating income. (Change in sales × Contribution margin ratio)
What is $9,000
If variable costs are 40% of sales and sales increase by $60,000, this is the increase in contribution margin.
(sales increase/ CM ratio)
What is $36,000?
Sunk costs and allocated costs are considered this type of costs.
What is irrelevant?
A company sells a product for $80 with a $30 variable cost and accepts a special order at $60 with idle capacity. This is the effect on net income for 1,000 units.
What is an increase of $30,000?
Share one key takeaway from this course that you plan to use in your future courses/career.
What is....