Shared Flashcard Set

Details

Acc 420
Test 2
18
Business
Undergraduate 4
11/08/2012

Additional Business Flashcards

 


 

Cards

Term
Cost estimation is:
Definition
the process of estimating the relation between costs and the cost drivers that cause them
Term
Costs can be :
Definition
Direct: Directly related to the activity.
Indirect: Not easy to predict, poses challenges for managers.
Term
A cost is what occurs when:
Definition
resources are acquired for production or other activity in an organization.
Term
An expenditure are the payments:
Definition
for the activities in an an organization. Expenditures do not always occure at the same time as the cost.
Term
Three reasons why organizations find it necessary to estimate costs:
Definition
1) To manage costs
2) Make decisions
3) plan and set standards.
Term
A simple cost behavior pattern is one in which costs are some combination of:
Definition
Fixed and variable:

TC= F+VX
Term
When it comes to real world applications of cost estimation:
Definition
Some companies use multiuple cost drivers and complex cost behaviors. Managers must weigh costs and benefits of using a more complex estimation method.
Term
Step Costs:
Definition
Change with activity of the cost driver but not in direct proportion. These costs increase in chunks. For example Rent for a store.
Term
What is the relevant range?
Definition
The relevant range is the range over which an organization expects to operate over which assumed cost patterns are reasonably accurate.
Term
Semivariable costs are:
Definition
Have elements of fixed costs and variable costs. Utility costs are an example, even the the organization shuts down, it will still have some electricity costs.
Term
Some costs are curved and difficult to predict, such as:
Definition
Learning curve
Term
What is the formula for learning curve?
Definition
Y=aX^b
Y= Average number of labor hours required for X units of cost driver volume
a= number of labor hours required for the first cost driver unit
X= cumulative number of cost driver units
b= Index of learning equal to the log of the learning rate divided by the log of 2
Ex: A learning rate of .8 would result in a value for b of -.322
Term
The idea behind the learning phenomenon is:
Definition
the greater the cost driver volume, the greater the experience.
Term
Three cost estimation techniques are:
Definition
1) Statistical methods, especially multiple regression analysis
2) Account analysis
3) Engineering estimates.
Term
A method that is even simpler than the simple regression method is the:
Definition
high/ low method.With the high-low method, the only information needed is the highest observation-pair of costs and activity and the lowest observation of cost and activity.
Term
What is the slope for the high/low method?
Definition
Slope = (Highest cost – lowest cost)/(highest quantity of cost driver – lowest quantity of cost driver)
Term
How do you find the intercept with the high low method?
Definition
Intercept= Total cost at lowest cost driver level – (Variable cost per unit X lowest quantity of cost driver
Term
In terms of validity, what is one of the most important measures?
Definition
R^2, which measures the proportion of the variation the the dependant variable ( Total costs) explained by the independant variable.
Supporting users have an ad free experience!