Term
| normal capacity utilization |
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Definition
level of capacity that satisfies average customer demand over a period that includes seasonal, cyclical, and trend factors
hides the amount of unused capacity
used for long-term plans
should not be used for judging current performance, will provide no meaningful feedback for a particular year |
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Term
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Definition
the level of capacity based on producing at full efficiency all of the time.
la la land |
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Term
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Definition
the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time, shut-downs for holidays and so on.
fixed in the short run |
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Term
| master-budget capacity utilization |
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Definition
| the level of capacity utilization that managers expect for the current budget period, which is typically one year |
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Term
| GAAP requirements for cost accounting |
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Definition
| companies should be comparable (absorption costing) |
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Term
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Definition
expected future costs
-must occur in the future
-must differ among the alternative courses of action
opportunity costs |
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Term
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Definition
costs that do not differ between the alternatives
historical costs, sunk costs, anything that happened in the past |
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Term
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Definition
variable costs
direct materials, direct labor, other man. oh costs
increasing units increases oh costs |
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Term
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Definition
a semi-variable cost
a cost that has both fixed and variable elements
so a fixed cost no matter the usage and then a variable cost for each usage
cell phone plan $60 for 1000 min, 1 per minute after that |
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Term
| why variance analysis is used |
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Definition
helps managers assess and maintain product profitability
monitors and controls costs and helps focus attention on areas not operating as expected
best for large companies with many departments
provides suggestions for further investigation rather than establishing conclusive evidence of good or bad performance |
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Term
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Definition
| measures the difference between actual variable OH costs incurred and flex-budget variable OH amounts |
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Term
| inventoriable costs under variable costing |
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Definition
| variable manufacturing costs (direct and indirect manufacturing variable costs)
(fixed costs are deducted as an expense) |
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Term
| inventoriable costs under absorption costing |
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Definition
variable manufacturing costs AND fixed manufacturing costs
fixed=period |
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Term
| criteria to choose the correct regression analysis |
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Definition
1. Economic Plausibility
2. Goodness of fit
3. Significance of Independent Variables
4. Specification Analysis
A. Linearity within the relevant range
B. Constant variance of residuals
C. Independence of residuals
D. Normality of residuals |
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Term
| crucial to data collection for regression analysis |
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Definition
numerous reliable observations of the cost drive (x) and the related costs (y)
a wide time frame for the cost driver |
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Term
| Industrial Engineering Method |
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Definition
the work-measurement method
estimates costs functions by analyzing the relationship btwn inputs and outputs when there is a physical relationship between inputs and outputs
time consuming |
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Term
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Definition
estimates the cost functions on the basis of analysis and opinions about costs and their drivers gathered from various departments of a company
(purchasing, process engineering, manufacturing, employee relations, and so on) |
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Term
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Definition
estimates cost functions by classifying various cost accounts as variable, fixed, or mixed with respect to the identified level of activity
qualitative |
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Term
| quantitative analysis method |
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Definition
| uses a formal mathematical method to fit cost functions to past data observations |
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Term
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Definition
simple to compute shows how cost driver effects the indirect manufacturing labor costs
uses highest and lowest values of the cost driver within the relevant range |
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Term
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Definition
| measures the average amount of change in the dependent variable associated with a unit change in one or more independent variables |
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Term
| limited capacity impact on special orders |
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Definition
variable costs change,
but fixed costs do not
you will have to decrease production from one client to add production to another
goal: maximize total contribution margin |
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Term
| short term vs. long term impact of special orders |
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Definition
| you can't make money just taking on special orders, you have to get back to your core business |
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