Managerial Accounting; Test 3 (ch20/21); Study Guide
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| Management should continually review... | show 🗑
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| show | net income will be greater if more contribution margin units are sold than low contribution margin units.
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| Cost-Volume Profit analysis (CVP): | show 🗑
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| CVP is important to profit planning & is a critical factor in determining: | show 🗑
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| The CVP income statement: | show 🗑
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| The CVP income statement is as follows: | show 🗑
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| Contribution Margin (CM): | show 🗑
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| CM is often stated both as... | show 🗑
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| CM can be expressed as... | show 🗑
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| Expenses can be... | show 🗑
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| show | the relative percentage in which each product is sold when a company sells more than one product.
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| show | different products often have substantially different contribution margin.
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| Sales mix formula is: | show 🗑
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| When finding sales mix with limited resources, it is necessary to find the... | show 🗑
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| To find sales mix with limited resources... | show 🗑
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| show | the product with the highest contribution margin per unit of limited resource.
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| show | refers to the relative proportion of fixed vs. variable costs that a company incurs.
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| show | a significant effect on profitability.
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| show | reduced their fixed costs & increased their variable costs
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| Operating leverage | show 🗑
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| Operating leverage is determined by a company's... | show 🗑
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| show | high operating leverage.
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| show | a sharp increase (decrease) in net income with a given increase (decrease) in sales.
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| show | measure of a company's earning volatility and can be used to compare companies
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| show | Contribution Margin / Net Income = Degree of Operating Leverage
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| Management's decision-making process frequently involves the following steps: | show 🗑
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| show | the process used to identify the financial data that change under alternative courses of action
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| show | the probable effects of the decision on future earnings.
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| show | estimates and uncertainty.
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| show | market analysts, engineers, and accountants.
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| In incremental analysis... | show 🗑
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| show | variable costs may not change under the alternative courses of action, while fixed costs do change
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| show | 1.) Accept an order at a special price.
2.) Make or buy component parts or finished products.
3.) Sell products or process further.
4.) Retain or replace equipment.
5.) Eliminate an unprofitable business segment.
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| show | the incremental revenue from the order exceeds the incremental costs.
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| It is assumed that sales in other markets will... | show 🗑
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| show | generally only variable costs will be affected.
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| show | the costs which are different under the two alternatives.
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| show | there is an opportunity to use the productive capacity for another purpose.
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| show | the potential benefit that may be obtained by following an alternative course of action.
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| show | additional cost of making the component.
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| show | Relevant, Opportunity, and Sunk costs
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| show | factors costs and revenues that differ across alternatives in incremental analysis.
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| show | ignored
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| Often in choosing one course of action, the company must... | show 🗑
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| show | Opportunity Cost.
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| A Sunk Cost is: | show 🗑
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| show | are NOT
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| show | have no
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| show | the costs which are affected by the two alternatives.
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| show | variable manufacturing costs and the costs of the new equipment.
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| show | sunk cost
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| A sunk cost is a: | show 🗑
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| Sales Mix sheet; BE 20-9 part a | show 🗑
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| Sales Mix sheet; BE 20-9 part b | show 🗑
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| Income Statement; Chapter 20 test problem; part b & c | show 🗑
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| show | 1.) (Row 1) Make --> Buy --> Net Income
2.)(Column 1) Direct Materials --> Direct Labor --> Variable Manu. Costs --> Fixed Manu. Costs (subtract Make from Buy for NI) --> Purchase Price (negative in NI).
3.) Total all
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| show | 1.) (Row 1) Make --> Buy --> Net Income
2.) (Column2) Total Costs (Totals from part a) --> Opportunity Costs --> Total Costs
**The additional amount goes in OC.
3.) Total everything
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| P21-1A; part a | show 🗑
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| The formula for Break-even Point in Dollars is? | show 🗑
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| The formula for Break-even Points in Units is? | show 🗑
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