Business 203 Ch 3

Front 1

cost prediction

Back 1

The application of cost measures to expected future activity levels to forecast future costs

Front 2

account analysis

Back 2

Selecting a plausible cost driver and classifying each account as a variable cost or as a fixed cost

Front 3

visual-fit method

Back 3

A method in which the cost analyst visually fits a straight line through a plot of all the available data

Front 4

engineering analysis

Back 4

The systematic review of materials, supplies, labor, support services, and facilities needed for products and services; measuring cost behavior according to what costs should be, not by what costs have been.

Front 5

high-low method

Back 5

A simple method for measuring a linear-cost function from past cost data, focusing on the highest-activity and lowest-activity points and fitting a line through these two points

Front 6

least-squares regression (regression analysis)

Back 6

Measuring a cost function objectively by using statistics to fit a cost function to all the data

Front 7

coefficient of determination (R²)

Back 7

A measurement of how much of the fluctuation of a cost is explained by changes in the cost driver

Front 8

Measurement of cost behavior

Back 8

Understanding and quantifying how activities of an organization affect levels of costs

Front 9

linear-cost behavior

Back 9

Activity that can be graphed with a straight line because costs are assumed to be either fixed or variable

Front 10

step costs

Back 10

Costs that change abruptly at intervals of activity because the resources and their costs come in indivisible chunks

Front 11

mixed costs

Back 11

Costs that contain elements of both fixed- and variable-cost behavior

Front 12

capacity costs

Back 12

The fixed costs of being able to achieve a desired level of production or to provide a desired level of service while maintaining product or service attributes, such as quality

Front 13

committed fixed costs

Back 13

Costs arising from the possession of facilities, equipment, and a basic organization: large, indivisible chunks of cost that the organization is obligated to incur or usually would not consider avoiding.

Front 14

discretionary fixed costs

Back 14

Costs determined by management as part of the periodic planning process in order to meet the organization’s goals. They have no obvious relationship with levels of capacity or output activity.

Front 15

cost measurement

Back 15

Estimating or predicting costs as a function of appropriate cost drivers

Front 16

cost function

Back 16

An algebraic equation used by managers to describe the relationship between a cost and it’s cost driver (s).

Front 17

activity analysis

Back 17

The process of identifying appropriate cost drivers and their effects on the costs of making a product or providing a service