Cost Behavior & Profitability

Flashcards created to review key concepts related to Cost Behavior & Profitability.

Cost behavior refers to how a cost will react to changes in the __ level of activity.

level

The three common classifications of costs are fixed costs, variable costs, and __ costs.

mixed

Fixed costs behave differently than variable costs because total fixed costs remain __ regardless of volume changes.

constant

The __ margin is the amount available to cover fixed expenses.

contribution

If SPI pays the band a fixed cost of $48,000 regardless of ticket sales, this represents a __ risk.

fixed cost

For SPI, variable costs increase in __ proportion with the number of tickets sold.

direct

A variable cost per unit remains __ regardless of the number of units sold.

constant

The equation for determining total mixed costs is Total Cost = __ + (VC per hour x # of Hours).

FC

The relevant range is the range of activity over which the definitions of fixed and __ costs are valid.

variable

The __ point is where profit equals zero.

break-even

Break-even sales measured in dollars can be determined by multiplying the number of units by the __ price per unit.

sales

The contribution margin per unit is calculated as the __ price per unit minus the variable cost per unit.

sales

As activity increases, the fixed cost per unit __ while the variable cost per unit remains constant.

increases

The formula method for break-even analysis is Sales – Variable Costs – Fixed Costs = __ .

Net Income

Fixed costs per unit __ as volume increases.

decrease

Mixed costs include both __ and variable components.

fixed

Molly’s restaurant's advertising costs are considered __ costs because they are budgeted per restaurant.

fixed

If a company's total fixed costs remain unchanged as production increases, then their fixed costs per unit will __ .

decrease

The contribution margin is the amount available to cover fixed expenses and thereafter to provide __ .

company profits