planning budgeting and forecasting

    Cards (12)

    • What is cost-volume-profit analysis concerned with?
      Effects on net operating income
    • What are the key factors that cost-volume-profit analysis considers?
      Selling prices, sales volume, unit variable costs, total fixed costs, and product mix
    • What are the major assumptions of cost-volume-profit analysis?
      Constant selling price, linear costs, constant sales mix, and no change in inventories
    • Why is the contribution approach used in cost-volume-profit analysis?
      It highlights cost behavior
    • What is the formula for calculating break-even sales value?
      Break-even sales value = break-even units * selling price per unit
    • What is the formula for calculating break-even units?
      Break-even units = total fixed expenses / contribution margin per unit
    • What is the formula for calculating margin of safety in terms of sales revenue?
      Margin of safety = total sales revenue - break-even sales revenue
    • What is the formula for calculating margin of safety in terms of units?
      Margin of safety = total sales units - break-even sales units
    • What is zero-based budgeting?
      Starting from scratch, analyzing every function for its needs and costs
    • Why is zero-based budgeting useful?
      It requires all costs to be specifically justified by the benefits expected
    • What are the key questions asked in cost-volume-profit analysis?
      • What is the scale of the business?
      • How much should be produced?
      • What point do they break even?
    • What are the major assumptions of cost-volume-profit analysis?
      • Selling price is constant
      • Costs are linear and can be accurately split into fixed and variable elements
      • Sales mix is constant in multi-product companies
      • Inventories do not change – the number of units produced equals the number of units sold
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