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accounting 11
accounting chapter 11 WGU C213
| Term | Definition |
|---|---|
| cost- volume- profit (C-V-P) analysis | techniques for find changes in revenues, cost and level of activity affect the profitability |
| key factors in C-V-P analysis are | revenues from sale prices charged for goods/services fixed and variable costs sales volume mis of product resulting profits |
| variable costs | costs that change in total in direct proportion to changes in activity level |
| relevant range | range of operating level/ volume activity total cost (variable +fixed) |
| fixed costs | costs that remain constant in total, regardless of activity level |
| stepped costs | costs that change in total in a stair-step fashion (in large amounts) with change in volume activity |
| mixed costs | costs that contain both variable and fixed costs components |
| scatter graph (visual- fit) method | segregating fixed and variable by total costs |
| regression line | scatter graph, straight line that most closely expresses the relationship between variables |
| variable cost rate | change in cost divided by the change in activity; slope of the regression line |
| high-low method | method of segregating the fixed and variable costs by cost of highest/lowest activity levels |
| contributions margin | difference between total sales and variable costs; portion of sales revenue available to cover fixed costs and provide a profit |
| per- unit contribution margin | excess of sales price of one unit over its variable cost |
| contribution margin ratio | (Selling price per unit - variable cost per unit) / selling price per unit |
| (sales price * units) - (variable costs * units) - fixed costs = | profits |
| sales revenue - ( variable costs ratio * sales revenue) - fixed costs = | profits |
| break- even point | the amount of sales at which total costs of the number of units sold equal total revenue; aka the point at which there is no profit or loss |
| target income | profit level desired by management |
| return on sales revenue (ROS) | measure the operating performance |
| return on sales equation (ROS) | (Operating profit / net sales revenue) * 100 = ROS |
| contribution margin equation | sales revenue - variable costs |
| target income equation | sales revenue - variable costs - fixed costs |
| sales revenue equation | sales price * number of units |
| variable costs equation | variable cost per unit * number of units or variable cost ratio * sales revenue |
| profit graph | graph that shows how profits vary with changes in volume |
| operating leverage | extent to which fixed costs replace variable costs as part of a companys cost structure; the higher the portion of fixed costs to variable costs, the faster income increase or decreased with changes in sales volume |
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