Exam2 - Flashcards(2) - Structure Managers Often have some...

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Contribution Margin Contribution Margin; Fixed Costs
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A company breaks even when ____ equals ____. The amount remaining from sales revenue after variable expenses have been deducted.
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Contribution marginSales – OR – - Price Variable CostPrice Contribution Margin
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Used first to cover fixed expenses; any remaining contributes to net operating income. Contribution Margin Ratio:
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Fixed CostUnit contribution margin – OR – - Fixed CostPrice Variable Cost Zero
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Profits at the Break- even Point. Break-even Point in units sold:
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Total Sales – Break-even Sales Fixed CostCM ratio – OR – ( - Fixed Cost Price Variable ) Cost Price
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Break-even point in total sales dollars: Margin of Safety:
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Cost Structure Margin of Safety
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Excess of budgeted (or actual) sales over the break-even volume of sales. Refers to the relative proportion of fixed and variable costs in an organization.
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High Fixed Cost
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Unformatted text preview: Structure Managers Often have some latitude in determining their organizations cost structure. Income will be higher in good years and lower in bad years. Contribution marginNet operating income OR -Price Variabel CostNet operating income Operating Leverage A measure of how sensitive net operating income is to percentage changes in sales. Degree of operating leverage: Commissions based on Sales Dollars Net Operating Income; 50% With an operating leverage of 5, if a company increases sales by 10%, ____ would increase by ____. Salesperson compensation that can lead to lower profits in a company. Sales Mix Contribution; Selling Price To eliminate conflict in salesperson compensation, commissions can be based on ____ rather than ____. The relative proportion in which a companys products are sold....
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This note was uploaded on 08/30/2011 for the course ACG 2071 taught by Professor Smith during the Spring '07 term at University of Central Florida.

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Exam2 - Flashcards(2) - Structure Managers Often have some...

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