# Shared Flashcard Set

## Details

ACC 202 Quiz 2
Chapters 3 and 4
27
Accounting
02/07/2012

Term
 Contribution Margin Ratio=
Definition
 =Contribution Margin / Sales
Term
 Variable Expense Ratio
Definition
 the ratio of variable expenses to sales
Term
 Dollar sales to attain a target profit
Definition
 (Target Profit + Fixed Expenses) / CM Ratio
Term
 Unit Sales to break even =
Definition
 Fixed Expenses / Unit CM
Term
 Unit Sales to attain the target profit
Definition
 (Target Profit + Fixed Expenses) / Unit CM
Term
 Contribution Margin=
Definition
 Sales-VC
Term
 Break even in sales
Definition
 FC / CMR
Term
 Margin of Safety=
Definition
 =total sales / break even
Term
 Operating Leverage
Definition
 CM / NOI
Term
 Account Analysis
Definition
 a method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves.
Term
 Activity Base
Definition
 a measure of whatever causes the incurrence of a variable cost. For example, the total cost of X-Ray film in a hospital will increase as the number of x-rays taken increases. Therefore the number of x-rays is the activity base that explains the total cost of x-ray film.
Term
 Committed Fixed Costs
Definition
 Investments in facilities, equipment, and basic organizational structure that can't be significantly reduced even for short periods of time without making fundamental changes.
Term
 Contribution Approach
Definition
 An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated according to organizational functions.
Term
 Contribution Margin
Definition
 the amount remaining from sales revenue after all variable expenses have been deducted.
Term
 Cost Structure
Definition
 the relative proportion of fixed, variable, and mixed costs in an organization.
Term
 Dependent Variable
Definition
 respond to some casual factor; total cost is the dependent variable as represented by the letter Y, in the equation Y=a+bx
Term
 Discretionary Variable
Definition
 fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research.
Term
 Engineering Approach
Definition
 a detailed analysis of cost behavior based on an industrial engineer's evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs.
Term
 High-Low Approach
Definition
 a method separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors.
Term
 Independent Variable
Definition
 acts as a casual factor, activity is the independent variable, as represented by letter X, in the equation Y=a+bx
Term
 Least Squares Regression Method
Definition
 a method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors
Term
 Linear Cost Behavior
Definition
 Cost behavior is said to be linear whenever a straight line is a reasonable approximation for the relation between cost and activity.
Term
 Mixed Cost
Definition
 contains both variable and fixed cost elements
Term
 Multiple Regression
Definition
 an analytical method required when variations in a dependent variable are caused more than one factor.
Term
 R squared
Definition
 A measure of goodness of fit in least-squares regression analysis. It is the percentage of the variation in the dependent variable that is explained by variation in the independent variable.
Term
 Relevant Range
Definition
 The range of activity within which assumptions about variable and fixed cost behavior are reasonably valid.
Term
 Step-variable cost
Definition
 the cost of a resource that is obtained in large chunks and that increases and decreases only in response to fairly wide changes in activity.
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