Jay

Front 1

A method for analyzing cost behavior in which each account under consideration is classified as either variable or fixed based on the analysts prior to knowledge of how the cost in the account behaves.

Back 1

Account analysis

Front 2

A measure of whatever causes the incurrence of a variable cost. For example, 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 an activity base that explains the total cost of X-ray film.

Back 2

Activity base

Front 3

Those fixed costs that are difficult to adjust and that relate to investment in facilities, equipment, and basic organizational structure.

Back 3

Committed fixed costs

Front 4

An income statement format that is geared to cost behavior in that costs are seperated into variable and fixed categories rather than being separated according to the functions of production, sales, and administration.

Back 4

Contribution approach

Front 5

The amount remaining from sales revenues after all variable expenses have been deducted.

Back 5

Contribution margin

Front 6

The relative proportion of fixed, variable, and mixed costs found within an organization

Back 6

Cost structure

Front 7

A relationship between cost and activity that is a curve rather than a straight line.

Back 7

Curvilinear costs

Front 8

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

Back 8

Dependent variable

Front 9

Those fixed costs that arise from annual decisions by management to spend in certain fixed cost areas, such as advertising and research

Back 9

Discretionary fixed costs

Front 10

A detailed analysis of cost behavior based on an industrial engineers evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs

Back 10

Engineering approach

Front 11

A method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels.

Back 11

High-low method

Front 12

A variable that acts as a causal factor; activity is the independent variable , as represented by the letter X, in the equation Y=a+bX

Back 12

Independent variable

Front 13

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.

Back 13

Least-squares regression method

Front 14

Cost behavior is said to be linear whenever a straight line is a reasonable approximation for the relation between cost and activity.

Back 14

Linear cost behavior

Front 15

A cost the contains both variable and fixed cost elements

Back 15

Mixed cost

Front 16

An analytical method required in those situations where variations in a dependent variable are caused by more than one factor

Back 16

Multiple regression

Front 17

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

Back 17

R2

Front 18

The range of activity within which assumptions about variable and fixed cost behavior are valid.

Back 18

Relevant Range

Front 19

The cost of a resource (such as a maintenance worker) that is obtainable only in large chunks and that increases and decreases only in response to fairly wide changes in the activity level.

Back 19

Step-variable cost

Front 20

The level of sales at which profit is zero. The break-even point can also be defined as the point where total sales equals total expenses or as the point where total contribution margin equals total fixed expenses.

Back 20

Break-even point

Front 21

A method of computing the break-even point in which the fixed expenses are divided by the contribution margin per unit.

Back 21

Contribution margin method

Front 22

The contribution margin as a percentage of total sales,

Back 22

Contribution margin ratio (CM ratio)

Front 23

The relationships between an organization's revenues, costs, and level of activity presented in graphic form

Back 23

Cost-Volume-profit (CVP) graph

Front 24

A measure, at a given level of sales, of how a percentage change in sales volume will affect profits. The degree of operating leverage is computed by dividing contribution margin by net operating income.

Back 24

Degree of operating leverage

Front 25

A method of computing the break-even point that relies on the equation Sales= Variable expenses + Fixed expenses + Profits

Back 25

Equation method

Front 26

An analytical approach that focuses only on those items of revenue, cost, and volume that will change as a result of a decision

Back 26

Incremental analysis

Front 27

The excess of budgeted (or actual) sales over the break-even volume of sales.

Back 27

Margin of safety

Front 28

A measure of how sensitive net operating income is to a given percentage change in sales. It is computed by dividing the contribution margin by net operating income

Back 28

Operating leverage

Front 29

The relative proportions in which a company's products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.

Back 29

Sales mix