# Shared Flashcard Set

## Details

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

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          \$2000Lowest                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=0solve 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 Marginless FC=Profit
Term
 express the breakeven pointformula
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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