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Principles of Accounting II

by: Audie McGlynn

Principles of Accounting II ACCT 2102

Audie McGlynn

GPA 3.69

Lee Taylor

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Lee Taylor
Class Notes
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This 7 page Class Notes was uploaded by Audie McGlynn on Friday October 2, 2015. The Class Notes belongs to ACCT 2102 at Abraham Baldwin Agricultural College taught by Lee Taylor in Fall. Since its upload, it has received 64 views. For similar materials see /class/217661/acct-2102-abraham-baldwin-agricultural-college in Accounting at Abraham Baldwin Agricultural College.


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Date Created: 10/02/15
CHAPTER 19 Fest Behavior and CesiVolmne Pro lAnslysis 3 Classi cations of Costs 1 Valiable Costs 2 Fixed Costs 3 Mixed Cosls ValiableCosls Vaiiable Costscosts that vary in total in proporlion to changes in the level of activity as production increases VC increase As he nmnber of units produced increases lhelomldireelmsleiialsmslineieases lhe uniteesl remains consent Fined Costs Wendi that remain the same in tnhldnlhr amount asthe level nfaedvity ehnnges As the number of units produced increases the tnta the unit cost deeienses fixed costs remains constant Mined Costs Mixed Unitshnsehnraetensdes nfhdtha vniahle and a xed cost HighLow Method 111nmforhusinessannlysismixedensts must be separated into heir xed and variable eenpenentsthnt is what this methdddnes Steps of HighLow Method 1 Idendfyhehighestlevelofusageandhe lowest level of usage 2 Take hedifferenee hetweenthehigh and low level of usage and hedifferenee betweenthetohlmstsofhesetlevehof usage 3 Chmputehevaiiablemstperdit Difference iitdtsi Cddff Difference iiuiage Steps of HighLow Method 4 Chmputehe Fixed Chsts can choose the high or low level Total costs vah39able costs fixed costs 0r Tohlcests VC per unitxno 0f unitst xed costs Mixed Costs ddtftdt Contribution Margin 39 The amount of funds left homasale alter the variable costs have been paid 39 Used to pay the lineal oostsol the business 39 OneeallFChavebeenpaidsalesareabovebrealr even any CM lettith 39 CM SalesVanable Costs 39 CM Ratio CMSales tlistells what of eaeh sales dollar is CMt 39 Onee again if sales are above brealreven thisis mu Conhibution Margin Problem Based on the sale of20000 units Millv u on r n nun lt Contribution Margin ll Baserlontheiternsthatyoueornputerlinthe previous problem oonpute the inerease in pro t Ml thatvvill result from a 50000 increase in sales assuming these sales are above brealreven 2t Computetheinereaseinpro ttltlthatwill result from a MOOunit inerease in sales assuring these sales are above brealreven BreakEven Point and Target Pro t Problems Tlislormula will allow us to calculate them even pomt in arid Tlitlomrula almallowx us to calculate the ma tales neoetm to aolieveatarget pro t Prolititztro at the breakeven point 39 Witammpmy tdetiredinmmelrom operauom 39 Sales mitt Fixed Potts Target Pro t Unit TontributionMargiu BrealxEveuChart and Profit Volume Chart Brealxeven ohatisalto called costvolume pro tohat 39 Providetaiitual representation of the breakeven point 39 Pro tvoluneohartitonpt 854 Breakeven Point for Companies Selling More than One Product Them muttbeeomtarrt to use the breakeven formula we learred 39 Uses the same formula except thata weighted average unit CM muttbeuted 39 Sales mitt Fixed Cottt Target Pro t Weighted Avgt Unit CM Breakeven Point for Companies Selling More than One Product Assunea gourmet food manufacturer has considered renlinga booth as a local mall to sell gift boxes of candy nuts and cookies during Chrisrnras The fixed costs to rent and operate the booth would be 27900 The uil CMs and sales mix anticipated by the co are as follows Breakeven Point for Companies Selling More than One Product Margin of Safely 39 Measures the amount by which current sales exceed sales as he breakeven points 39 Canheexpressedasapercenlage in dollarsorinurils Margin of Safety as a Percentage 39 Shows the that salescandrnp without resultinginarnperatinglnss Margin nfSafety0 sales 0sales at breakeven point 0 sales Operating Leverage 39 CM0perating1ncnrne 39 Indicates how much operating incarne will increase multiplied by any increase in sales Operating Leverage 39 Calculate the operating leverage of acnnnrary with 800000 in sales 200000 in vaiable casts and 400000 in xed costs An operating leverage 0ft indicates that operating income will increase3 nines any increase in sales 39 ieifsales increase by 5 operating incarne will increase 15


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