Professional Documents
Culture Documents
1. What kinds of expense are included in Cost of Goods (also known as Direct
Costs)?
Expenses directly associated with producing and making a specific
product. Companies differ as to which expenses they attribute to cost
of goods, but generally items such as source materials, direct labor,
and freight are included.
2. What kinds of expense are NOT included in Cost of Goods?
Excludes indirect expenses such as distribution costs and sales force
costs.
3. What kinds of expense are included in Fixed Costs (also known as Overhead
or Indirect Costs?)
Ongoing expenses or overhead of a business that occur regardless of
the amount of sales. These expenses usually include items such as
rent, utilities, salaries.
4. What kinds of expenses are NOT included in Fixed Costs?
5. What
6. What
7. What is Gross Profit? What is Gross Profit Margin? What would cause it to be
negative?
Gross profit is a companys total revenue (equivalent to total sales)
minus the cost of goods sold. Gross profit is the profit a company
makes after deducting the costs associated with making and selling its
products, or the costs associated with providing its services.
Gross Profit Margin: average percentage of gross income realized after
cost of goods
A negative gross profit margin occurs when costs exceed revenue.
8. How do you calculate Break Even Point?
a. How do you calculate it if you know your price per unit, direct cost per
unit, and total fixed costs?
b. How do you calculate it if you know your direct cost per unit, total fixed
costs, and expected volume, and need to calculate breakeven price per
unit?
c. How do you calculate it if you know your maximum price per unit, total
expected unit volume, and your total fixed costs, and need to calculate
maximum direct cost per unit?