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Module 3 ACCTG 225 Equations Terms in this set (23) ROI NOI / Avg. Operating Assets, tells you the profit earned per dollar invested in operating assets ROI Margin x Turnover Margin NOI / Sales Turnover Sales / Average Operating Assets Residual IncoR148,52
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Module 3 ACCTG 225 Equations Terms in this set (23) ROI NOI / Avg. Operating Assets, tells you the profit earned per dollar invested in operating assets ROI Margin x Turnover Margin NOI / Sales Turnover Sales / Average Operating Assets Residual Inco
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Course
GED - General Educational Development
Institution
GED - General Educational Development
Module 3 ACCTG 225 Equations
Terms in this set (23)
ROI NOI / Avg. Operating Assets, tells you the profit earned per dollar invested in operating assets
ROI Margin x Turnover
Margin NOI / Sales
Turnover Sales / Average Operating Assets
Residual Income= Net Operating Income - (Average Oper...
Module 3 ACCTG 225 Equations
Jeremiah
Terms in this set (23)
NOI / Avg. Operating Assets, tells you the profit earned per dollar invested in operating
ROI
assets
ROI Margin x Turnover
Margin NOI / Sales
Turnover Sales / Average Operating Assets
Net Operating Income - (Average Operating Assets x Minimum Required Rate of
Residual Income= Return), concept that investors subtract a minimum ROR from NOI to determine
whether the company met expectations
Economic Value Added: cost of capital is subtracted from a modified operating income
1. negotiated transfer prices ie segment manager meet to discuss and agree upon
transfer prices
Transfer Pricing:
2. Setting transfer prices at cost using either variable cost or full absorption cost
3. Use market price
Sellers: TP > variable cost per unit + total contribution margin lost on sales/number of
units transferred
Negotiated transfer price equations:
Buyers: TP < cost of buying from outside supplier
Buyers: TP < profit earned excluding transfer price/units sold
units company can manufacture before hitting capacity, when operating at capacity (or
Idle capacity:
beyond idle capacity), special orders/transfers must cover lost CM to be worth doing
-Traceable FC: incurred because of the existence of the segment
-Common FC: supports the operations of more than one segment but not directly
Segments:
traceable to one segment
-Segment margin= Segment CM - TRACEABLE fixed costs
Sunk cost a cost that has already been committed and cannot be recovered, not relevant
avoidable cost a cost that can be eliminated by choosing one alternative over another
opportunity cost potential benefit that is given up when one alternative is selected over another
Module 3 ACCTG 225 Equations
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