# Shared Flashcard Set

## Details

Accounting 231
Chapter 4,5,6
33
Accounting
02/23/2012

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 priod 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 toatal 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 behvior. Sosts are seperated into variable and fied categories rather than being separated according to organizational functions.
Term
 Contribution Margin
Definition
 The amount remaining from sales revenues 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
 A variable that responds to some causal factor; total cost is this as represented by the letter Y, in the equation Y=a+bX
Term
 Discretionary Fixed Costs
Definition
 Those 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 Method
Definition
 A method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels.
Term
 Independent Variable
Definition
 A variable that acts as a causal factor; activity is this as represented by the 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
 A cost that contains both variable and fixed cost elements.
Term
 Multiple Regression
Definition
 An analytical method required when variations in a dependent variable are caused by more than one factor.
Term
 Rsquared
Definition
 A measure of goodness of fit in least-square 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.
Term
 Conversion Cost
Definition
 Direct Labor cost plus Manufacturing Overhead Cost.
Term
 Equivalent Units
Definition
 The product of the number of partially completed units and their percentage of completion with respect to a particular cost. These are the number of complete whoe units that could be obtained from the materials and effort contained in partially completed units.
Term
 FIFO Method
Definition
 A process costing method in which equivalent units and unit costs relate only to work done during the current period.
Term
 Process Costing
Definition
 A costing method used when essentially homogeneous products are produced on a continuous basis.
Term
 Weighted-Average Method
Definition
 A process costing method that blends together units and costs from both the current and prior periods.
Term
 Break-Even Point
Definition
 The level of sales at which profit is zero.
Term
 Contribution Margin Ratio (Cm ratio)
Definition
 A ratio computed by dividing contribution margin by dollar sales.
Term
 Cost-Volume Profit(CVP) Graph
Definition
 A graphical representation of the relationships between an organization's revenues, costs, and profits on the one hand and its sales volume on the other hand.
Term
 Degree of Operating Leverage
Definition
 A measure, at a given level of sales, of how a percentage change in sales will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income.
Term
 Incremental Analysis
Definition
 An analytical approach that focuses only on those costs and revenues that change as a result of a decision.
Term
 Margin of safety
Definition
 The excess of budgeted (or actual) dollar sales over the break-even dollar sales.
Term
 Operating Leverage
Definition
 A measure of how sensitive net operating income is to a given percentage change in dollar sales.
Term
 Sales Mix
Definition
 The relative proportions in which a company's products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.
Term
 Target Profit Analysis
Definition
 Estimating what sales volume is needed to achieve a specific target profit.
Term
 Variable Expense Ratio
Definition
 A ratio computed by dividing variable expenses by dollar sales.
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