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Ch. 19 cost behavior
exam
32
Accounting
Undergraduate 2
07/30/2008

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Cards

Term
Cost Behavior
Definition
the way costs respond to changes in volume or activity
Term
Variable costs
Definition
total costs that change in direct proportion to changes in productive output or any other measure of volume.
Term
breakeven point
Definition

The point at which total revenues equal total costs.

Term

contribution margin

Definition
The amount that remains after all variable costs are substracted from sales.
Term

Cost-volume-profit (CVP) analysis

Definition
An examination of the cost behavior patterns that underlie the relationships among cost, volume of output, and profit.
Term
engineering method
Definition
A method that separates costs into their fixed and variable components by performing a step-by-step analysis of the tasks, costs, and processes involved in completing an activity or product.
Term

fixed costs

Definition
Total costs that remain constant within a relevant range of volume or activity.
Term

high-low method

Definition
A three-step approach to separating a mixed cost into its variable and fixed components.
Term
Margin of safety
Definition
The number of sales units or amount of sales dollars by which actual sales can fall below planned sales without resulting in a loss.
Term

mixed costs

Definition
costs that have both variable and fixed
Term

What is a realistic measure of what an organization is likely to do?

Definition
normal capacity
Term
Operating capacity
Definition
The upper limit of an organization's productive output capability, given its existing resources.
Term
Practical capacity
Definition
Theoretical capacity reduced by normal and expected work stoppages.
Term
Regression analysis
Definition
A mathematical approach to separating a mixed cost into its variable and fixed components.
Term
Relevant range
Definition
The span of activity in which a company expects to operate.
Term
Sale mix
Definition

The proportion of each product's unit sales relative to the company's total unit sales.

Term
scatter diagram
Definition
A chart of plotted points that helps determine whethera linear relationship exists between a cost item and its related activity measure.
Term
Theoretical (ideal) capacity
Definition
The maximum productive output for a given period in which all machinery and equipment are operating at optimum speed, without interruption.
Term

variable costs

Definition
Total costs that change in direct proportion to changes in productive output or any other measure of volume.
Term
Which of the following statements contradict the philosophy underlying the just-in-time operating environment?
Definition
Large inventories are maintained in order to fulfill customer orders on a timely basis.
Term

 

Which of the following statements most accurately explains the behavior of costs?

Definition
There is no norm; rather, costs can be fixed, variable, or a combination of both.
Term
Which of the following statement is true regarding fixed and variable costs?
Definition

Fixed costs are constant in total, and variable costs are constant per unit.

Term

 

Calculate the variable cost per activity base.

                         month                Activity level  Highest             D.  200          $2000

Lowest                A.   100              1000

Definition

100               1000

 

1000/100=$10 per Machine hour

Term

Calculate the total fixed costs

 

 highest

 

2000 - (2000 x $10)

 

Definition

Total ficed costs =Total costs - total variable costs

= -18000

Term

What is the equation for CVP?

Definition
S-VC-FC=P
Term
How do you solve for the break even point?
Definition

S-VC-FC=0

solve for x

Term
What is the CM?
Definition
Sales-VC= CM
Term
What S-VC=MC-FC=P?
Definition

                                Units produced and sold 

 

Sales revenue    

less VC

= Contribution Margin

less FC

=Profit

Term

express the breakeven point

formula

Definition
Term
What is targeted sales units formula?
Definition
Term
What is the targeted sales units?
Definition
fc+ p/cm per unit
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