Q AT 690 Chapter 15 Notes – Income and Expenses 1. The fundamental measurements used to track financial success are __________________, _________________ and ____________________. 2. Profit is not a ____________-letter word and is the lifeblood of an open market economy. 3. The most basic of all financial measurements is __________________. 4. Income is something of ______________ that you receive in return for the services and products that you deliver. 5. Income is categorized in some accounting systems as ____________ or _____________ sales. 6. In an automotive shop the primary item of value that the company has to sell is ________________. 7. The costs or financial outlay involved in doing business are called __________________. 8. Control of expenses is essential for ______________________ success. 9. Only by ________________________ expenses can any organization assure that all of their efforts will result in a profit. 10. You need to manage expenses by dividing them into smaller categories. There are two common and direct methods. The first method divides expenses into three major categories what are they? 11. The second method categorizes expenses as either _______________ or ________________. 12. Costs of items or services that ate directly related to a specific transaction are called _______________ expenses. 13. Direct expenses are also often referred to ______________ ______ ______________ ____________. 14. They include all costs that can be __________________ tied to a specific transaction. 15. The parts used on the vehicle and the _______________ to work on the car are examples of direct expenses. 16. What do you do if an item is used directly for a transaction but not used up? 17. Expenses that are used across a number of transactions or projects are called ________________ expenses. 18. These indirect expenses may be __________________ or ________________. 19. What are two questions to ask to see if an expense is a direct expense? 20. What would be two examples of an indirect expense used to repair a car? 21. Expenses that are required for a company to exist and continue to occur even if little or no production occurs are known as __________________________ expenses. 22. What are some examples of overhead expenses? 23. Another example of an overhead expense is the _______________________ office. 24. Because overhead expenses do not change in relationship to the work being performed or products being produced, they are the most _______________________ to change. 25. To reduce overhead expense on net profit you need to maximize the amount of _________________ or __________________ that can be produced. 26. If your overhead remains steady, the best way to increase profit is to increase________________. 27. Overhead expenses are hard to reduce. If you are in a tough situation what are some things you can do to reduce overhead.? 28. Expenses that occur as a result of being in business that must be paid every month even if you don’t conduct any business are known as ____________________ expenses. 29. Even though it is a fixed expense it does not mean that It can’t go _______ or __________ from month to month. 30. What’s an example of a fixed expense? 31. The way to determine if the expense is fixed is ask what? 32. ____________________ expenses are those expenses related to the ongoing operations of the company. 33. Variable expenses change based on the volume of work _____________________ and ______________. 34. What is an example of a variable expense in the repair facility? 35. What question would you ask to determine if an expense was variable or not. 36. One item or transaction can create _____________________ types of expenses 37. A service advisor is an example of a dual expense where his salary is considered __________________ and his commission is considered ______________________. 38. The same exact expenses can be classified in _______ different ways based on different _____________. 39. Heat, light and power would be considered __________________ expenses but when using the variable/fixed method they are ____________________ expenses. 40. Overhead expenses are not related to _____________________ and fixed expenses are not directly related to ______________. 41. The difference between the amount that you receive for your services or products (income) and the cost of doing business (expenses) is known as _________________. 42. What is the formula for Profit 43. To increase profit you can ___________________ income (sell more) or __________________ your expenses (cost) or you can do ________________ at the same time. 44. In order to increase profitability the first thing that a business will normally try to do is to increase _____________ however , to increase sales you are probably going to incur additional _____________. 45. The percentage of profit you generate for each dollar of sales is known as ________________ margin. 46. What is the profit margin formula? 47. The profit margin calculation is a valuable and quick tool to use as you establish _________________ for any service. 48. A common measure that service manager’s deal with is ______________ ________________. 49. Gross profit can be calculated by taking the total _________________ amount minus the _______________ costs or taking total sales minus ______________ _______ _______________. 50. What is the formula for Gross Profit? 51. The manager is held most accountable for the price of ____________ and _____________ and the cost of ________________ and _______________ because they are typically the ones the manger can control. 52. Gross profit only takes into account the income and expenses that are __________________ involved with individual transactions. 53. Gross profit is often a key element in a service manager _________ plan and is based on _______ or _________ of the gross profit. 54. It is common for a service manager to be paid a _______________ plus a ____________ for reaching certain gross profit level or percentage. 55. The ratio between sales and gross profit is called gross profit ____________________. 56. What is the formula for gross profit percent? 57. What are two performance indicators that you should know as a manager? 58. Typically in a new car dealership the service department only gets credit for the one item it can sell which is _____________. 59. _________ profit takes into account all expenses of the company which includes the variable (direct) and fixed (indirect and overhead) expenses of the company. 60. What is the Net Profit formula? 61. Many companies want to involve all managers to work together to achieve a company net profit so they will look at individual departments as __________________ center. 62. Under a profit center concept, they view and evaluate each department as a smaller _______________ within the _____________________ this is responsible for generating sales, a gross profit, and a net profit. 63. When the company divides indirect cost between the departments it is called ____________________. 64. The cost center approach to financial management makes all of the departments keenly aware of and intimately involved in working to keep the company ______________________.