Class:  ACC 312  FUNDAMENTALS OF MANAGERIAL ACC 
Subject:  Accounting 
University:  University of Texas  Austin 
Term:  Spring 2015 
1. Variable
2. Fixed
3. StepVariable
4. Step
5. Curvilinear
6. SemiVariable
* These numbers are based on high and low activity levels *
The difference between sales revenue and breakeven sales
Remember: Fixed Costs are based on a total, not by unit
Cost of Good manufactured  The
difference between total manufacturing cost (Direct material – raw material
included, direct labor, and manufacturing overhead) and workinprocess
inventory 
Product cost  Costs recorded at the time of purchase  think Cost of Goods Sold  costs you had to pay because you were making a product for resale 
Period Costs  Costs incurred during the period  think operating expenses 
Opportunity Cost  Cost of giving up the next best option 
Sunk Cost  Cost incurred in the past – do not consider this
when making a decision for the future 
Marginal Cost  The cost to make one more of an item 
Average cost  The cost of making that total batch divided by
the expense 
6 different kinds of graphs that can display costs  1. Variable 2. Fixed 3. StepVariable 4. Step 5. Curvilinear 6. SemiVariable 
Cost Estimation Methods  Accounting Classification – categorizing
expenses between fixed, semivariable, and variable Visual Fit – a pretty
picture HighLow method – look below Regression – think stats. 
HighLow Method  Difference between cost / Difference between units produced = Variable Cost Fixed cost = Total Variable Cost  Units Produced * Variable Cost * These numbers are based on high and low activity levels * 
BreakEven Point  Volume of Activity where revenues = expenses 
Break Even Point Equation  Break Even Point = Sales Revenue (Sales Price * Units)  Variable Expense (Unit Variable Expense * Units)  Fixed Expense = 0 
Unit Contribution Margin  Sales Price  Unit Variable Expense 
Break Even Point (In units)  BEP (in units)= (Fixed Expense)/(Unit Contribution Margin) 
Gross Margin v. Total Contribution Margin  Gross
Margin = Sales Rev – Variable Exp – Fixed Expense Total Contribution Margin = Sales Rev  Variable Exp 
Contribution Margin Ratio  Contribution Margin / Sales 
Break Even Point (in sales dollars)  Fixed Expense / CM Ratio 
Finding Target Profit  Either use the breakeven equation and instead
of using a 0, use the net profit number or use the equation: (Fixed Expense + Target Profit) / Unit Contribution Margin 
Safety Margin  The difference between sales revenue and breakeven sales 
Information needed to make a decision  Accurate – precise; timely – available in time;
and relevant – it has a bearing on the future and is different from competitors 
When making a decision about a special order  No excess capacity – look at variable cost of
decision; With excess capacity – look at variable & opportunity cost Remember: Fixed Costs are based on a total, not by unit 
Calculating CVP – cost volume profit analysis  When looking at two or more products, use a Sales Mix to calculate out the breakeven point 1. Find Sales Mix: Unit Contribution Margin / Total number of goods 2. Find Weighted Contribution Margin: Use Sales Mix * Contribution Margin = Unit Contribution Margin then plug into Fixed Expense / Unit Contribution Margin 3. Take breakeven point number and apply to sales mix. 
Calculating Before Tax Net Income  Target After Tax Net Income / (1  Tax Rate) *This formula can be applied to find the new breakeven point or
target profit* 
Front 
Back 


Cost of Good manufactured  The
difference between total manufacturing cost (Direct material – raw material
included, direct labor, and manufacturing overhead) and workinprocess
inventory  
Product cost  Costs recorded at the time of purchase  think Cost of Goods Sold  costs you had to pay because you were making a product for resale  
Period Costs  Costs incurred during the period  think operating expenses  
Opportunity Cost  Cost of giving up the next best option  
Sunk Cost  Cost incurred in the past – do not consider this
when making a decision for the future  
Marginal Cost  The cost to make one more of an item  
Average cost  The cost of making that total batch divided by
the expense  
6 different kinds of graphs that can display costs  1. Variable 2. Fixed 3. StepVariable 4. Step 5. Curvilinear 6. SemiVariable  
Cost Estimation Methods  Accounting Classification – categorizing
expenses between fixed, semivariable, and variable Visual Fit – a pretty
picture HighLow method – look below Regression – think stats.  
HighLow Method  Difference between cost / Difference between units produced = Variable Cost Fixed cost = Total Variable Cost  Units Produced * Variable Cost * These numbers are based on high and low activity levels *  
BreakEven Point  Volume of Activity where revenues = expenses  
Break Even Point Equation  Break Even Point = Sales Revenue (Sales Price * Units)  Variable Expense (Unit Variable Expense * Units)  Fixed Expense = 0  
Unit Contribution Margin  Sales Price  Unit Variable Expense  
Break Even Point (In units)  BEP (in units)= (Fixed Expense)/(Unit Contribution Margin)  
Gross Margin v. Total Contribution Margin  Gross
Margin = Sales Rev – Variable Exp – Fixed Expense Total Contribution Margin = Sales Rev  Variable Exp  
Contribution Margin Ratio  Contribution Margin / Sales  
Break Even Point (in sales dollars)  Fixed Expense / CM Ratio  
Finding Target Profit  Either use the breakeven equation and instead
of using a 0, use the net profit number or use the equation: (Fixed Expense + Target Profit) / Unit Contribution Margin  
Safety Margin  The difference between sales revenue and breakeven sales  
Information needed to make a decision  Accurate – precise; timely – available in time;
and relevant – it has a bearing on the future and is different from competitors  
When making a decision about a special order  No excess capacity – look at variable cost of
decision; With excess capacity – look at variable & opportunity cost Remember: Fixed Costs are based on a total, not by unit  
Calculating CVP – cost volume profit analysis  When looking at two or more products, use a Sales Mix to calculate out the breakeven point 1. Find Sales Mix: Unit Contribution Margin / Total number of goods 2. Find Weighted Contribution Margin: Use Sales Mix * Contribution Margin = Unit Contribution Margin then plug into Fixed Expense / Unit Contribution Margin 3. Take breakeven point number and apply to sales mix.  
Calculating Before Tax Net Income  Target After Tax Net Income / (1  Tax Rate) *This formula can be applied to find the new breakeven point or
target profit* 
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