Financial vs Management
This type of accounting is used primarily within the company.
Managerial
Are costs that can be traced back to a product.
Direct costs
Change in total with respect to changes in sales volume.
Variable costs
What the acronym stands for.
Cost-volume-profit
This type of income statement is organized by product and period costs.
GAAP Income statement
This type of accounting reports information to people outside of the company.
Financial
These materials are used in order to manufacture a product but are part of manufacturing overhead.
Indirect materials
Costs that do not change when sales volume changes.
Fixed costs
Method used to determine NOI of $0.
Break-even analysis
This is the measure of cushion a company has before it will suffer a loss.
Margin of Safety
Is bound by GAAP.
Financial
Manufacturing overhead is part of this type of cost.
Indirect costs
This is a cost of an alternative not being picked.
Opportunity cost
If you have a variable cost of $3/unit and a contribution margin of $7/unit, what are your fixed costs if you have NOI of $1,200 and sold 1,500 units?
$9,300
CM = $10,500 ($7 x 1,500 units)
FC = ??
NOI = $1,200
When determining a predetermined allocation rate, do you use estimated or actual numbers?
Estimated
Provides information at various detail levels of an organization.
Managerial
Prime costs go into this cost bucket.
Direct costs
High-Low analysis is used to do this.
Separate mixed costs in the variable and fixed components.
You need to sell 200 units to break even and contribution margin is $125/unit. How many additional units need to be sold to have an NOI of $2,500?
20 units
$2,500 / $125 = 20 units
Manufacturing overhead is a product or period cost.
Product cost
Uses all available data to focus on future performance.
Managerial
Wages paid to manufacturing employees.
Direct labor
This is used to separate mixed costs when there is a large amount of data.
Regression analysis
If fixed costs are $15,000 and variable costs are $4/unit, what are the break even units if each unit sells for $10?
2,500 units
UCM = $10 - $4 = $6
$15,000 / $6 = 2,500 units
This type of costing is the backbone of how most companies allocate costs.
ABC costing