ACC 102 test notes (2)

ACC 102 test notes (2) - Variable cost (VC) per unit Total...

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KEY FORMULAS Variable cost (VC) per unit Difference in Total Cost (Y) Difference in Activity Level (X) Total Fixed Costs Fixed Costs = Total Cost – (Variable Cost per Unit x Activity) Contribution Margin per unit Unit Sales Price – Variable Cost per Unit Or Total Contribution Margin Number of Units Sold Contribution Margin Ratio Unit Contribution Margin Unit Sales Price Or Total Contribution Margin Total Sales Revenue Break-even Units Total Fixed Costs Unit Contribution Margin Break-even Sales Break-even Units x Unit Sales Price Or Total Fixed Costs Contribution Margin Ratio Target Units Total Fixed Costs + Target Profit Unit Contribution Margin Target Sales Revenue Target Units x Unit Sales Price Or Total Fixed Costs + Target Profit Contribution Margin Ratio Margin of Safety Actual or Budgeted Sales – Break-even Sales Margin of Safety % Actual or Budgeted Sales – Break-even Sales Actual or Budgeted Sales TERMS: 1. Cost Behavior – way in which total costs change when some measure of activity changes. Activities that cause total cost to change are referred to as cost drivers. 2. Relevant Range – range of activity over which we expect our assumptions about cost behavior to hold true. 3. Variable Costs – costs that change, in total, in direct proportion to changes in activity levels. Total variable costs change with activity, but variable costs per unit remains constant. 4. Fixed Costs – remain the same in total regardless of activity level. On a per unit basis, however, fixed costs decrease with increases in activity levels. 5. Step Costs – are fixed over some range of activity and then increase in a steplike fashion when a capacity limit is reached. 6. Step-variable Costs – tend to be fixed over a fairly narrow range and rise in multiple steps across the relevant range. 7.
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ACC 102 test notes (2) - Variable cost (VC) per unit Total...

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