Accounting Exam Review

18 cards·by lizboy92

Fixed Costs

remain unchanged in amount when volume of activity varis from period to period within a relevent range

Target Income

what many companies annual plans are based off of sometimes called budgets

Margin of Safety

Expected sales- break even sales/ expected sales

Break even sales in dollars

Fixed costs/contribution margin

Contribution Margin Per Unit

selling price per unit- variable cost per unit

Contribution Margin Ratio

Contribution margin per unit/ selling price per unit

How to calculate how many units to sell to a earn a specefic pre-tax income?

fixed costs+pre-tax income goal / selling price-cariable costs

Break even point in units

Fixed costs/ contribution margin per unit

Break Even Point

sales level where a company neither earns a profit nor incurs a loss

Items included in production costs

direct material, direct labor, factory overhead

Margin of Safety

the excess of expected sales over the break even sales level, amount sales can drop before the company incurs a loss

Contribution Margin Per Unit

amount by which a product's unit selling price exceeds its total variable cost per unit

Opportunity Cost

potential benefit lost by choosing a specefic action from two or more alternatives

Mixed Costs

includes both fixed and variable cost components, example a fixed salary with commission

Costs Volume Profit Anaylsis

predicts how changes in costs and sales levels affect income by computing the sales level at which a company neither earns an income or loss

Sunk Costs

has already incurred and cannot be avoided or changed and irrelevant to future decisions

Incremental costs

additional cost incurred only if a company pursues a specefic course of action

Variable Costs

changes in proportion to changes in volume of activity