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cost (cost behavior (CVP / break-even (affects changes (costs (variable,…
cost
cost behavior
fixed
constant (in total) over output.
Depreciation
insurance
property taxes
administrative salaries
monthly rent
mortgage or car payments
*employee salary
in TOTAL but change per unit based on the actual amount of production.
variable
vary (in total) with changes in volume or sales
Direct materials
applied overhead
sales commissions
for a manufacturer
hourly workers
wage employees
depreciation under units of prod
remain the same PER UNIT but CHANGE in total.
mixed (semivariable)
costs have both fixed and variable characteristics
Electricity
assuming the variable part changes with volume
examples - utilities cell phone!
step
assuming the variable part changes with volume
Supervisors’ salaries
at certain points, the step costs increase to higher amounts
CVP / break-even
affects changes
prices
costs
variable
fixed
volume
on profits in the short run.
contribution margin
revenue exceeds the variable costs of producing
Sales – Variable Cost
Contribution Margin RATIO =
Sales – Variable Cost/ Sales
Profit equation
Net income = Revenue – Total variable costs – Fixed costs
Break – for a single product
sales revenue and costs charged to that period are equal
express in dollars of sales revenue
expresses in number of units produced or sold
BE Units =
Fixed Costs/
Contribution Margin per unit
Sales Price – Variable Cost per Unit