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Flashcards in B2 Deck (19)
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1
Q

What is absorption approach

A

it is US GAAP and does not segregate fixed and variable costs.

2
Q

What is contribution approach

A

it is NOT gaap uses variable costing (also called direct costing.

3
Q

What is Unit Contribution Margin equation

A

Sale Price per unit less Variable cost per unit

4
Q

What is the Contribution Margin Ratio equation

A

=contribution margin divided by Revenue

also (Sales less Variable Cost) divided by sales

5
Q

Is absorption approach a product cost or a period cost?

A

Product cost. all fixed factory overhead is treated as a product cost and is included in inventory values

6
Q

Is contribution approach (variable costing) a Product Cost or a Period Cost?

A

Period Cost. all fixed factory overhead is treated as a period cost and is expensed in the period incurred even if not sold

7
Q

what is the equation for the Break even in units

A

=Total fixed costs divided by Contribution margin per unit

8
Q

what is the equation for the break even point in dollars

A

=unit price X breakeven point in units

also = Total fixed costs divided by Contribution Margin Ratio

9
Q

what is the equation for the sales in units

A

=(Fixed cost + pretax profit) divided by Contribution Margin per unit

10
Q

What is the equation for the sales in dollars

A

= Variable costs + Fixed Costs + Pretax Profit

11
Q

What is the equation for Contribution Margin Ratio including pretax profit?

A

Sales = (Fixed Cost + Pretax profit) divided by Contribution margin ratio

12
Q

What is the selling price per unit

A

=(fixed costs + Variable costs + Pretax profit) divided by number of units sold

13
Q

What is the Margin of Safety in dollars

A

=Total sales in dollars less Breakeven sales in dollars

14
Q

What is the margin of Safety %

A

= Margin of safety in dollars divided by Total Sales

15
Q

What is the equation for Target Cost?

A

=Market Price less required profit

16
Q

Breakeven analysis assumes that over the relevant range:

a. Unit revenues are nonlinear
b. Unit variable costs are unchanged
c. Total costs are unchanged
d. Total fixed costs are nonlinear

A

b. Unit variable costs are unchanged.
the following are incorrect because they are linear a & d
c is incorrect because total costs are based on the number of units

17
Q

For special order decisions, Presumed excess capacity, why would we accept?

A

Accept if price is > Variable cost per unit

18
Q

For special order decisions, Presumed Full capacity, why would we accept?

A

Accept if price > Variable cost per unit + opportunity cost per unit

19
Q

The equation Y =a+bX what do the variables stand for?

A
Y = the dependent variable. Total cost 
X = the independent variable. Total Units
a = the Y axis intercept, it is the total fixed costs
b = The slope of the regression line. (Δ Y over Δ X)