1.
% change in profit: % change in profit = % change in sales × (1/ MOS)
2.
Break even volume: Break even Volume = Fixed Cost/ Unit Contribution Margin
= (FC/CMR) - FC
3.
Calculate change in variable costs: - Sum the costs classified as variable
- Divide by amount in the volume activity
- Multiply by the change in activity to estimate total controllable variable costs
4.
Capacity: the maximum volume of activity that a company can sustain with available resources
5.
Contribution margin: revenues less variable costs
6.
Contribution Margin Ratio: Contribution Margin Ratio = (Price - UVC)/Price
7.
Controllability: cost or benefit that changes because of the decision
8.
Controllable Costs and Benefits: - All the costs you never had
- Pertain to the future
- Computes absolutes change in profit
9.
Conversion Costs: Direct labor
manufacturing overhead
10.
Cost Allocations: - Cost pool
- Denominator volume
- Cost driver
- Cost object
11.
Cost Hierarchy: 1. Unit-Level costs
2. Batch-Level costs
3. Product-Level costs
4. Facility-Level costs
12.
CVP Model: 
13.
Decision Framework: 1. Specify decision problem, including decision maker's goals.
2. Identify options.
3. Measure costs and benefits to determine the value of each options.
4. Make the decision, choosing the option with the highest value.
14.
Demand and Supply Imbalance: 
15.
External Decisions: - Comprehensive reports (financial statements)
- Defined rules (GAAP) with guidelines by organizations such as Financial Accounting Standards Board (FASB)
- Statements issued at regular intervals
16.
Incremental or differential approach: Using one option as benchmark, add incremental costs and benefits to determine incremental value
17.
Internal Decisions: - Decision specific data produced
- No pre-set rules for how to process
- Produced as needed
18.
Inventory Equation: Cost of beginning inventory
+ Cost of goods purchased during the period
- Cost of ending inventory
= Cost of goods sold (COGS) during the period
19.
Limitation with CVP: Can not always predict best decision for all situations
20.
Margin of Safety: 
21.
Multiproduct CVP Model: 
22.
Operating Leverage: Operating Leverage = Fixed cost/ Total Cost
23.
Opportunity Cost: = Value of next best option
24.
Organization: A collection of individuals
25.
Period Costs: costs that not product costs, related to marketing and administration
-below the line
-expensed in the period the are incurred
-do not flow through inventory accounts
26.
PIER Cycle: Plan
Implement
Evaluate
Revise
27.
Prime Costs: Direct materials
Direct labor
28.
Product Costs: costs related to getting a cost or service ready for sale
- above the line
- can be inventoried
29.
Profit: Profit = (P - VC) x Q - FC
= (CMR x REV) - FC
30.
Profit After Taxes: PAT = PBT - (tax rate x PBT)
= (1- tax rate) x (CM - FC)
31.
Relevance: a controllable cost or benefit that is different for at lease one decision alternative
32.
Relevant Costs and Benefits: - Compare across all options
- Reserves ranking of decision options with fewer measurements
33.
Sarbanes-Oxley: improved quality and transparency in financial reporting and independent audits
34.
Steps for Cost Allocation: - Calculate rate
Rate= cost in pool / denominator volume
- Allocate cost to cost object
Allocated amount = # of driver units in object X rate
35.
Sunk Costs: Costs that have already occurred, not controllable or relevant
only effect future with high magnitude
36.
Totals or Gross approach: Add costs and benefits for every option to determine total value
37.
Traceability: extent to which we can identify cost or benefit with decision option
38.
Types of organizations: - Service
- Merchandising
- Manufacturing
39.
Unit contribution margin: the contribution margin from one unit
40.
Value: = Benefits less costs
- Measure relative to status quo
- Considers future costs and benefits only
41.
Variability: relation between cost or a benefit and some underlying activity
42.
Ways to Reduce Loss due to Conflict: 1) Policies and procedures
2) Monitoring
3) Incentive schemes and performance monitoring
