Managerial Accounting Chapter 5

Front 1

Account analysis

Back 1

a method for analyizing cost behavior in which each account is classified as either variable or fixed based on the analyst's prior knoledge of how thecost in the accoutn hegaves

Front 2

activity base

Back 2

a measure of whatever causes the incurrence of a variable cost. For example, the total cost of C-ray film in a hospital will increase as the number of x-rays taken increases. There fore the nuber of x-rays i the activity base that explains the total cost of x-ray film

Front 3

committed fixed costs

Back 3

fixed costs that are difficlut to adjust because they relate to the investment in facilities, equipment, and the basic organizationsl structure of a company

Front 4

contribution approach

Back 4

an income statement format that is geared to cost behavior. costs are separated into variable and fixed categories rather than being separated according to th funcionts of production, sales and administraton

Front 5

contribution margin

Back 5

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

Front 6

costs structure

Back 6

the relative proportion of fixed, variable and mixed costs in an organization

Front 7

curvilinear cost

Back 7

a relation between cost and activity that is a curve rather than straight line

Front 8

dependent variable

Back 8

a varibal ethat respondst to some causual factor; total cost is th dependent variable as represented by the letter Y in th equation Y=a+bx

Front 9

discretionary fixed costs

Back 9

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

Front 10

engineering approach

Back 10

a detailed analyis of cost behavior baased on an industrial engineer's evaluation of the inputs that ar required to carry out a particlular activity and of the prices of tose inputs

Front 11

high-low method

Back 11

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

Front 12

independent variable

Back 12

a varibal etat acts as acausea factor' activty is the independ varibale, as represented by the letter X in teh equaion Y=a+bX

Front 13

Least-squares regression method

Back 13

a method of sepparating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sume of the squared errors

Front 14

linear cost behavior

Back 14

cost behavior is said to be linear when a strait line is a reeasonable approximation for th relations between cost and activity

Front 15

mixed cost

Back 15

a cost that contais both variable and fixed cost elements

Front 16

relevant range

Back 16

the range of activty within which assumptions about variable and fixed cost behavior are valid

Front 17

step-variable cost

Back 17

the cost of a resource that is obtainable only in large chunks and that increases and decreases only in response to fairly wide chanbes in activity (such as the cost of a maintnence worker)