Accounting

Front 1

Product Cost

Back 1

all costs that are involved in the purchase of goods. DM, DL, MOH

Front 2

Direct Materials

Back 2

become a part of a finished product

Front 3

Direct Labor

Back 3

Factory labor costs traced to individual units of product

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MOH

Back 4

All costs assoc. with manuacturing except direct materials and direct labor.

Front 5

Variable costs

Back 5

a cost that varies in total in direct proportion to vanges n the level of activty. Constant per unit

Front 6

Fixed costs

Back 6

A cost that remains constant in total regardless of changes in the level of activity. Varies inversely with the level of activity when expressed per unit.

Front 7

Differential costs

Back 7

a difference in cost between two alternatives

Front 8

Sunk costs

Back 8

any cost that has been incurred and cannot be changed by any decision made now or in the future

Front 9

Opportunity costs

Back 9

the potential benfit that is fiven up when one alternative is selected over another

Front 10

Contribution margin

Back 10

the amount remaining fr. sales revenue after variable expenses have been deducted

Front 11

Contribution Margin Ratio

Back 11

contribution margin/sales

Front 12

break even analysis

Back 12

the level of sales at which profit is 0

Equation method: sales=variable expenses+fixed expenses + profits

CM method:
break even pt in units= fixed expenses/unit contribution margin

break even in sales dollars: Fixed expenses/CM ratio

Front 13

target profit analysis

Back 13

sales=variable+fixed+profits

unit sales to target profit= fixed+target profit/unit CM

dollar sales to reach target profit= fixed + target profit/ Cm ratio

Front 14

cost center

Back 14

q business segment whose manager has control over cost but has no control over revenue or the use of investment funds

Front 15

Profit Center

Back 15

a business segment whose manager has control over cost and revenue but ahs no control over the useof investment funds

Front 16

Investment center

Back 16

A business manager who has control over cost, revenue and the use of investment funds

Front 17

traceable fixed cost

Back 17

a fixed cost that isincutted because of the ecistance of a particular business segment and would be eliminated if the segment were eliminated. \example: the maintence fixed cos for the building in which boeings are mafe is a traceable cost of that segment of boeing

Front 18

common fixed cost

Back 18

a fixed cost that supports more than one business segment but is not traceable in whole or in part to anyone of the business segments
example: the cost of heating a grocery store is a common fixed cost of the various departments

Front 19

dangers of common costs

Back 19

allocating common costs to the segments that fixed costs suppor tis a recipe for disaster

Front 20

Return on Investment

Back 20

net operating income/average operating assets

margin x turnover
net opearating income/sales x sales/average operating assets

Front 21

how to improve Roi

Back 21

increase sales, reduce expeses, reduce assets

Front 22

criticisms of ROI

Back 22

-no balanced scorecard, mgt not know how to increase it

-mgrs inherit committed cost s that they have no control over
-mgrs evaluated on ROI may reject profitable investment opportunites.

Front 23

Residual income

Back 23

net operating income over some minimum return on operating assets

operating assets x required rate of return=required income
actual income-required income= residual income
-encourages mgrs to make profitable investments

Front 24

Transfer pricing

Back 24

the price charged when one segment of the company provides goods or services to another segment of the company

-transfer prics>VCU+CM on lost sales/units transferred

Front 25

negociated transfer price

Back 25

results from negotiations between the buying and selling division

-they preserve the autonomy of division
-mgrs negotiating the price usally have a better understanding of the costs and benfits of the transfer than others in the company.

Front 26

market price

Back 26

the priced charged for an item in the open market, usually the best approach to transfer pricing

Front 27

relevant cost

Back 27

a cost that differs between alternatives

Front 28

avoidable costs

Back 28

relevant costs. can be avoided in part or whole y choosing one alternative over another

Front 29

make or buy decision

Back 29

carry out value chain internally or buy from an external seller

all of the costs that deal with making the product compared the cost of buying the good... Outside suppliers price+DM, DL, VOH, FOH.

Front 30

special order

Back 30

1 time order, 1 time deal, fixed costs should not be affected by this order or it is not a good deal

increase in incremental revenue-increase in incremental costs= incremental NOI

Front 31

joint product

Back 31

two or more products produced from a common input

Front 32

split off point

Back 32

the ponit in the maufacturing process where the joint products can be recognized as separate products.

Front 33

sell or process further

Back 33

it is always profitable to continue to continue prodcucing a product after the split off point as long as the incrementall revenue is greater than the incremental processing costs after the split off point

-sales value after further processing (-sales value at the split off pt.)=incremental revenue- cost of further processing=profit/loss from further processing

Front 34

bottleneck

Back 34

the machine or process that is limiting overall output-the constraint

Front 35

using the constraint

Back 35

a)CM per unit.....
b)Time to produce one unit...
CM of constraint=a)/b)

CM of constraint....
(X) additional units that can be processed in one hour.....
= Additional contribution margin
so one would meet current demand for prouct with highes unit CM margin and then use the rest of the time/money to make the other product

Front 36

tax revenue

Back 36

tax revenue=tax rate X tax base

Front 37

taxing jurisdictions

Back 37

local, state, federal, international

Front 38

sufficient tax

Back 38

it provides enough funds to pay for th epublic goods and services needed by the gov't. levying the tax.

Front 39

income effect

Back 39

-tax increase--> base increase
-tax decrease--> base decrease
-work to keep after tax income the same
-more powerful for lower income tax payers

Front 40

substitution effect

Back 40

-tax increase-base decrease
-tax decrease-base increase
-substitute between labor and leisure
- more compelling to higher income tax payers

Front 41

convenience

Back 41

gov't viw- a tax is convenient if it is easy to administer, easy to understand and it offers few opportunities for non-compliance
taxpayers view: the tax is easy to pay, easy to determine and requires minimal time to comply

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horizontal equity

Back 42

persons with the same ability to pay the tax should owe the same amount

Front 43

vertical equity

Back 43

persons with a greater ability to pay owe more tax than persons with a lesser ability to pay

Front 44

regressive structure

Back 44

the rate of tax paid cdecreases with an increase in tax base

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proportionate structure

Back 45

levies a tax that is the same percentage of income regardless of the tax base amount

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progressive structure

Back 46

levies a tax which as a proportion of income, increases as income increases.

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average tax rate

Back 47

the tax rate on income determined by dividing the tax paid by an income measure

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margnal tax rate

Back 48

the rate of tax applied to the next dollar of taable income
progressive-rate increases as income increases
proportionate-average and marginal rates are the same

Front 49

tax avoidance

Back 49

legitimate means of reducing taxes

Front 50

tax evasion

Back 50

illegal means to reduce taxes

Front 51

in a federal tax system who are the two primary entities that pay tax on business income?

Back 51

individuals and corporations

Front 52

income shifting

Back 52

transfer income form a high tax rate to a lower tax rate entity

Front 53

deduction shifting

Back 53

transferring expenses from a low tax rate enity to a high tax rate entity

Front 54

opportunity costs

Back 54

the potential benefit given up when one alternative is chosen over another

Front 55

jurisdictions

Back 55

tax costs decrease and cash flows increase when tax is generated in a jurisdiction with a lower tax

Front 56

character variable

Back 56

tax costs decrease and cash flows increase when income is taxed at a preferential rate because of its character

Front 57

implicit taxes

Back 57

reduction in the rate of return that a taxpayer receives because the market has bid up the price f the tax favored asset

Front 58

trnasaction based tax

Back 58

tax that is triggered when an event occurs or a transaction takes placeactivity based tax

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activity based tax

Back 59

when a tax is imposed on the cumulative result of an ongoing activit

Front 60

realty tax

Back 60

tax that is on the ownership of real property

Front 61

ad valorhem taxes

Back 61

real property and personal property taxes

Front 62

abatement

Back 62

tax emption granted by the government for a limited period of time

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personalty

Back 63

any asset that is not realty.

3 general categories: household tangibles, business tangibles and intangibles

Front 64

sales tax

Back 64

tax on the retail sale of tangible personaly.

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use tax

Back 65

every state wth a sales tax imposes this, when the owner of goods does not pay the sales tax to obtain the good( get it out of state)

Front 66

excise tax

Back 66

imposed on retail of specific goods (gas, cigarettes ,liquor)

Front 67

how can governments impose a new tax to create revenue?

Back 67

by taxing a new base, by increasing the tax on an ecsting base and by expanding the base of an existing tax.

Front 68

static forecast

Back 68

assumes that the base variable is unrelated to the rate variable. Increase in the tax rate incraeases government revenues

Front 69

dynamic forecast

Back 69

when a jurisdiction can predict how the ax rate will affect the base and incorporate this prediction into its revenue projection

Front 70

ordinary income

Back 70

the income generates by routine sales or services to customers

Front 71

capital gain

Back 71

the sale or exchange or certaunb types of property(capital assets)