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17 Cards in this Set
- Front
- Back
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account analysis
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a method for analyzing cost behavior in which an account is classified as either variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves
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activity base
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a measure of whatever causes the incurrence of a variable cost. ex. the total cost of x ray film in a hospital will increase as the number of x rays taken increases. Therefore the number of x rays is the activity base that explains the total cost of x ray film
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committed fixed costs
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investments in facilities, equipment, and basic organizational structure that cant' be significantly reduced even for short periods of time without making fundamental changes
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contribution approach
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an income statement format that organizes costs by their behavior. costs are separated into variable and fixed categories rather than being separated according to organizational functions.
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contribution margin
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the amount remaining from sales revenues after all variable expenses have been deducted
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cost structure
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the relative proportion of fixed variable and mixed costs in an organization
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dependent variable
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a variable that responds to some causal factor; total cost is the dependent variable as represented by the letter Y in the equation y= a + bX
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Discretionary fixed costs
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those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research
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engineering approach
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a detailed analysis of cost behavior based on industrial engineer's evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs
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high low method
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a method of seperating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels
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independent variable
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a variable that acts as a casual factor;activity is the independent variable as represented by the letter X
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least-squares regression method
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a method of seperating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors
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linear cost behavior
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cost behavior is said to be linear whenever a straight line is a reasonable approximation for the relation between cost and activity
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mixed cost
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a cost that contains both variable and fixed elements
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multiple regression
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an analytical method required when variations in a dependent variable are caused by more than one factor
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R2
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a measure of goodness of fit in least squares regression analysis it is the percentage of the variation in the dependent variable that is explained by variation in the independent variable
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relevant range
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the range of activity within which assumptions about variable and fixed cost behavior are reasonably valid
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