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19 Cards in this Set

  • Front
  • Back

Absorption Costing

In this costing method, ALL manufacturing costs are treated as product costs (including direct materials, direction labor, and BOTH variable and fixed manufacturing overhead.)

Contribution Format Income Statement

An INTERNAL income statement format that separates Variable Expenses from Fixed Expenses

Variable Costing

In this costing method, only those manufacturing costs THAT VARY WITH OUTPUT are treated as product costs. This typically includes direct materials, direct labor and variable manufacturing overhead (NOT fixed manufacturing overhead)

Segment

Any part of (or activity of) an organization about which a manger would seek cost, revenue, or profit data.

List examples of segments

- Division of the company


- Sales territory


- Individual store


- Manufacturing plant


- Marketing depatment (cost center)


- Segment of customers


- Product lines

Traceable Fixed Costs

Fixed costs that would disappear over time if the segment itself disappeared. These costs can be traced back to the specific "segment."

Give an example of a traceable cost

Salary of the Fritos product manager (if Fritos were eliminated, the cost of the product manager would also go away.)

Common Fixed Costs

Fixed costs are necessary for the overall operation of the company. These would not disappear if any particular segment were eliminated.

Give an example of a Common Fixed Cost

A company's CEO if only one manufacturing plant was closed.

Segment Margin

A segement's contribution margin MINUS any traceable fixed costs of the segment. This is a valuable tool for assessing the long-run profitibility of a segment.

Selling and Admin expenses are never treated a ____________ costs regardless of the costing method.

Product

Fixed manufacturing costs are included in _________ under the absorption costing method.

COGS

Fixed manufacturing costs are included in _________ under the Variable costing method.

Inventory

In the Weighted Average Method...

- There is no distinction between work done in prior vs. current periods


- Equivalnt units of production is a thing

Period costs are broken into what two categories?

- Direct Materials


- Conversion costs

Target Profit Analysis

Determining what sales volume is needed to achieve a specfic target point.

Operating leverage

Measure of how sensitive net operating income is to a given percentage change in dollar sales.

Degree of Operating Leverage

A ratio demonstrating how much net income (or profit) will change if sales volume changes. For example, if the degree of operating leverage is 4, then a sales increase of 20% would be expected to increase profit by 80%.

Name the four assumptions commonly used in Cost-Colume Profit analysis

- Selling price is constant. The selling price of a product (or service) will not change as volume changes.


- Costs are linear and can be accurately divided into variable and fixed elements.


- In multiple companies, the sales mix is constant


- In manufacturing companies, inventories do not change (units produced = units sold)