What Is the Criterion-Group Method and How Was It Used

question 20

Essay

What is the criterion-group method and how was it used to develop the MMPI?

Analyze and calculate average fixed costs per unit at a defined activity level.

Calculate gross margin and distinguish it from contribution margin.

Apply the concept of relevant range in cost analysis.

Understand how to calculate and analyze gross margin.

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Definitions:

Productive Capacity

Refers to the maximum output or productive ability of resources, facilities, or organizations, emphasizing efficiency and optimization.

Contribution Margin

The contribution margin is the difference between total sales revenue and total variable costs, indicating how much revenue contributes towards covering fixed costs and profit generation.

Underutilising

Refers to the scenario where resources are not being used to their full potential or capacity, often leading to inefficiency or wastage.

Variable Overhead Efficiency Variance

A metric used to measure the difference between the actual variable overhead cost and the standard cost of the actual production volume.