Business Administration 2257 Study Guide - Final Guide: Fixed Cost, Cash Flow, European Cooperation In Science And Technology
3 Apr 2020
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Direct cost per unit: only direct/ traceable costs (variable cost/unit) Direct material (forming), direct labour, direct selling expenses. Use= floor price, contribution analysis, break even calculations. Absorption cost per unit- all production costs regardless of fixed v. variable. Use= compare relative plant efficiency, financial report (changes w/ volume) Use= long-term pricing strategy/determining normal price/ cost-plus price. Cost-plus-price= cost is determined and added to a mark-up price that lead to desired profit level. Allocation rate (allocate costs on a / unit basis) = total (overhead) total proxy. Allocation rate x proxy $ (or hrs/ units) = allocated overhead/ unit (floor price) Mitigate- rent v. buy, extend days of a/p, encourage faster a/r, altering dividend payments, alter timing of inv. Reasons for operational cash flows: (should only be temporary: tight economy- extended credit terms to customers, expanded product line- require sig. + in a/r & inventory, growing company- will experience cash flow shortages - development.
