CVP analysis, transfer pricing, capital budgeting, working capital and risk management.
40 cards · basic cards · AI-written, checked twice. Edit anything.
- What is contribution margin per unit?
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Selling price per unit minus variable cost per unit- How is contribution margin ratio calculated?
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Contribution margin per unit divided by selling price per unit- What is the break-even point in units?
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The quantity where total revenue equals total cost and profit is zero- How do you calculate break-even in units?
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Fixed costs divided by contribution margin per unit- Define margin of safety
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The difference between expected sales volume and break-even sales volume- What does degree of operating leverage measure?
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The sensitivity of operating profit to a percentage change in sales volume- How does sales mix affect the break-even point?
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Different products have different contribution margins, changing the overall break-even quantity- In a high fixed-cost environment, what happens to operating leverage?
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Operating leverage increases, making profits more sensitive to sales volume changes- What is transfer pricing?
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The price charged when one division sells goods or services to another division within the same organization- Describe the market price transfer pricing method
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Setting the transfer price equal to the external market price for similar goods or services- What is the cost-plus transfer pricing method?
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Transfer price equals the full cost of the product plus a markup percentage- Explain the negotiated transfer pricing method
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The buying and selling divisions agree on a mutually acceptable transfer price through negotiation- What is the arm's length principle?
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Transfer prices should be set as if the divisions were independent entities at market rates- Why is transfer pricing important for tax compliance?
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Different jurisdictions have different tax rates; transfer pricing can shift profits between locations and affect total tax liability- What transfer price maximizes overall company profit?
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The price that optimizes total company profit, which may differ from what maximizes individual divisional profit
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