# Shared Flashcard Set

## Details

Chapter 10
7
Accounting
05/09/2008

Term
 Chapter 10
Definition
 Determining How Costs Behave
Term
 Cost Function
Definition
 A mathematical description of how a cost changes with changes in the level of an activity relating to that cost.
Term
 General Issues in Estimating Cost Functions[Basic Assumptions]
Definition
 1.Variations in the level of a single activity (the cost driver) explain the variations in the related cost. 2. Cost behavior is approximated by a linear function within the relevant range.
Term
 Brief Review of Cost Classification
Definition
 Choice of Cost Object  Time Horizon Relevant Range
Term
 Cost Estimation & Prediction
Definition
 Estimation: Think Past Prediction: Think Future
Term
 Cause-and-Effect Criterion for Choosing Cost Drivers
Definition
 1. A physical Relationship between the level of activity and costs 2. A contractual arrangement  3. Knowledge of Operations
Term
 Estimating a Cost Function Using Quantitative Analysis
Definition
 1. Choose a Dependent Variable 2. Identify the Independent Variable,or Cost Driver3. Collect data on the Dependent Variable and the Cost Driver4. Plot the data5. Estimate the cost function6. Evaluate the cost driver of the estimated cost function
Supporting users have an ad free experience!