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Flashcards in Cost behaviour Deck (16):
0

give examples of fixed costs

real estate taxes
insurance
supervisory salaries

1

give examples of variable costs

raw materials, direct labor, shipping costs

2

what are mixed costs

fixed component + variable increase

3

how can you estimate cost behaviour

use regression analysis (data from previous periods)

4

high low method

look at lowest and highest level of activity only

5

what is contribution margin

sales revenue - variable cost

6

contribution margin ratio

contribution margin/ revenues

7

how does contribution margin format of income statement look like

revenues
less variable cost
contribution margin
less fixed cost
operating income

8

what's the principle of cost-volume-profit analysis

by selling products with a positive contribution margin oer unit you first earn back your fixed costs and then start making profit

9

break even point analysis

= number of units for which income is zero = fixed costs/contribution margin per unit

10

break even point as expressed in sales ?

fixed costs / contribution margin ratio

11

how do you use break even points to show the sales volume needed to earn any amount of operating income ?

unit sales = (fixed costs + desired income)/contribution margin per unit

euro sales = (fixed costs + desired income)/contribution margin ratio

12

each $1 increase in sales revenue results in a total contribution margin increase of $0.4. If sales increase by 60000, what will be the increase in total contribution margin ?

60000 x 0.4= 24000

13

what is margin of safety?

a measure of risk that describes a company' scurry the sales performance relative to its break- even sales

= total sales revenue - break even sales revenue

14

margin of safety ratio

margin of safety / total sales revenue

15

what does high operating leverage indicate?

product or a firm has a relatively high level of fixed costs

= contribution margin/operating income