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25 Cards in this Set
- Front
- Back
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cost behavior
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general term for describing whether a cost changes when the level of output changes
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fixed cost
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costs that in total are constant within the relevant range as the level of the activity driver varies
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variable costs
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costs that in total vary in direct proportion to changes in an activity driver
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mixed costs
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costs that have both a fixed and variable component
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activity capacity
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when a firm acquires the resources needed to perform an activity
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practical capacity
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efficient level of activity performance
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flexible resources
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resources that are supplied as used and needed from an outside source
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committed resources
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resources that are supplied in advance of usage
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committed fixed expenses
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costs incurred for the acquisition of long-term capacity
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discretionary fixed expenses
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shorter-term committed resources
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step fixed costs
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costs that follow a step-cost behavior with wide steps
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1. high-low method
2. scatterplot method 3. method of least squares |
3 widely used methods of separating a mixed cost into its fixed and variable component
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dependent variable
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a variable whose value depends on the value of another variable
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Independent variable
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a variable that measures activity output and explains changes in the activity cost
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intercept parameter
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corresponds to fixed activity cost. where the mixed cost line intercepts the cost (vertical) axis
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slope parameter
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corresponds to the variable cost per unit of activity
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high-low method
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preselects the two points (highest and lowest) that will be used to compute the parameters F and V
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(high cost - low cost)/(high units - low units)
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formula for variable cost (v) for high-low method
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scatterplot method
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a method to fit a line to a set of data using tow points that are selected by judgement
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deviation
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the difference between the predicted and actual costs
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coefficient of correlation
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a measure of goodness of fit, which is the square root of the coefficient of determination
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multiple regression
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when least squares is used to fit an equation involving two or more explanatory variables
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the learning curve
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shows how the labor hours worked per unit decrease as the volume produced increases
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cumulative average-time learning curve model
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states that the cumulative average time per unit decreases by a constant percentage, or learning rate, each time the cumulative quantity of units produced doubles
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learning rate
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expressed as a percent, and it gives the percentage of time needed to make the next unit, based on the time it took to make the previous unit
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