types of cost information, variable and fixed costs. Variable costs are costs that change when some variable used in the cost to produce a product changes. For example if you were in the business of producing knives, then the price of the metal used to manufacture those knives would be your variable cost. Another variable cost that has to be accounted for in the cost of manufacturing is labor costs and supply costs. So the variable cost for each knife manufactured would equal the variable cost of metal
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The Basic Profit Equation: Cost-Volume-Profit analysis (CVP) relates the firm’s cost structure to sales volume and profitability. A formula that facilitates CVP analysis can be easily derived as follows: Profit = Sales – Expenses Profit = Sales – (Variable Costs + Fixed Costs) Profit + Fixed Costs = Sales – Variable Costs Profit + Fixed Costs = Units Sold x (Unit Sales Price – Unit Variable Cost) This formula is henceforth called the Basic Profit Equation and is abbreviated:
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cots, variable costs? Costs- can be classified by their relationship to the amount of services provided and relationship to unit (department) being analyzed. Cost does not equal cash flow. [Cost – referred to as activity, utilization or volume] Variable Costs are those costs that are expedited to increase and decrease with volume ( patient days, number of visits, gloves, syringes needed…)— in total variable costs the cost rate remains the same. Fixed Costs are the costs that are expected
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Dr. Japheth Kaluyu 1 What is the value of the cost pool? The Housekeeping department of Ruger Clinic consisted of $100,000 in total budgeted costs for the year of 2007. The cost pool is basically direct costs of one support department. In the case of Ruger Clinic, the cost pool's value is $100 K. 2aWhat is the allocation rate if patient services revenue is used as the cost driver? The cost pool, which must be found first, is the total cost of the Housekeeping department which
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direct costs in 2007. These costs must be allocated to Ruger’s three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated $5million in total revenues in 2007, and to support these clinical activities, they used 5,000 hours of housekeeping services. 1 What is the value of the cost pool? The allocated amount of the cost pool
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Grace Manuella P 327023 Accounting IUP Using Costs in Decision Making Cost information and the important role it plays in strategy development and in monitoring the results of implementing the strategy. The use of cost information is pervasive throughout decision – making situations. Pricing Cost information is used to deciding price by organizations in two ways : * In markets where the organization faces a market – determined price; * In markets where the organization can set its price
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Department of Ruger Clinic Wiley (2004) defines cost volume profit (CVP) as an accounting method that is used to analyzes changes in profit as they are related to sales, volume, cost and pricing. This is an important tool for managers because the information the analysis provides is used to project various operation requirements. A cost volume profit analysis reflects: which product or service should be focused on, the volume needed to reach the maximum profit requirements, the amount of revenue required
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following is NOT a key assumption of cost-volume-profit? A. Costs may be fixed, variable, mixed or step. B. Production and sales are equal. C. Changes in total cost are strictly due to changes in activity. D. Total costs and revenues can be depicted with a straight line. 2. If production does not equal sales, A. it must adjust the CVP formulas for that fact if it wishes to use CVP. B. it cannot use CVP, as an assumption is violated. C. a CVP analysis will always indicate a breakeven point
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GEZ PETROL STATION: USING COST-VOLUME-PROFIT ANALYSIS FOR PLANNING By KU NOR IZAH KU ISMAIL (Corresponding author) School of Accountancy UUM College of Business Universiti Utara Malaysia E-mail: norizah@uum.edu.my Tel: 04-9283906 And WAN NORDIN WAN HUSSIN Othman Yeop Abdullah Graduate School of Business Universiti Utara Malaysia GEZ PETROL STATION: USING COST-VOLUME-PROFIT ANALYSIS FOR PLANNING INTRODUCTION As an Area Manager of GEZ Berhad, a major oil company in Malaysia
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traditional costing method typically believe that the volume metric is the factor that drives the manufacturing overhead costs. The traditional costing system does not accurately represent the manufacturing costs that are affiliated with the production of an item. It is designed more so for departmental focus, not process focus and focuses on cost incurred not cause of costs. On the contrary, activity based costing is designed to assign costs to activities. ABC is becoming more widely used since
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