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7 Cards in this Set
- Front
- Back
Variable Costs |
Remain the same per unit at every level Vary in total directly and proportionately with changes in the activity level curvilinear relationship |
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Fixed Costs |
Costs the remain the same in total regardless of changes in the activity level Cost per unit varies inversely with activity: as volume increases, unit cost declines, ect. nonlinear relationship |
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Relevant Range |
Range of activity over which a company expects to operate during a year. |
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Mixed Costs |
Change in total but not proportionately with changes in the activity level. ex: utilities |
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Basic Components of CVP Analysis |
Volume or level of activity Unit selling prices Variable costs per unit Total fixed costs Sales Mix |
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Importance of CVP Analysis |
Profit planning Setting selling prices Determining product mix Maximizing use of production facilities |
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Contribution Margin Definition |
Revenue remaining after deducting variable costs Can be expressed as per unit or as a ratio |