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Variable and absorption costing

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Helen Adams Accounting 225 Review questions for Chapter 6 (CVP)

1. How would you describe what a contribution margin tells you?

2. How would you describe what a contribution margin ratio tells you?

3. What impact do fixed costs have on breakeven?

4. How do you calculate breakeven for a multiproduct firm?

5. What is the crucial assumption for a multiproduct breakeven?

6. What is incremental analysis? Accounting 225, Helen Adams VARIABLE VS ABSORPTION COSTING CHAPTER 7 GOAL:

1) to understand the difference between variable and absorption costing,

2) understand why NI changes with both production and sales volume with absorption costing, (which method reports the highest net income)

3) Reconcile the difference between Variable and Absorption Net Income,

4) Understand how breakeven relates to Variable costing only. This means we have to understand how fixed costs work both in total and the effect of per unit fixed costs (which, remember, are evil.)


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