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26 Cards in this Set
- Front
- Back
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TC=VC*X+F, F is?
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Total Fixed Costs, intercept
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TC=VC*X+F, VC is?
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The Cost Driver, the slope
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TC=VC*X+F, X is?
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The number of cost driver units
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Conversion Costs
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costs incurred to convert direct material into final product, the cost for direct labor and manufacturing overhead. (DL+MOH)
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Prime Costs
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are direct costs, the costs of direct material and direct labor. (DL+DM)
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As volume goes up, Total Variable costs
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increase
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As volume goes up, Total Fixed costs
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remain the same
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As volume goes up, variable costs per unit
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remain the same
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As volume goes up, fixed costs per unit
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decrease
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cost center
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an organizational subunit, such as a work center or department, whose manager is responsible for the cost of an activity for which a well-defined relationship exist between inputs and outputs. They are often found in manufacturing operations where inputs, such as direct material and direct labor can be specified for each output. The production departments of manufacturing plants are these, In banks, check processing departments, since standards can be established. In hospitals,food service departments, laundries, and laboratories
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revenue center
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the manager is held accountable for the revenue attributed to the subunit. The reservation department of an airline and the sales department of a manufacturer.
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profit center
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manager is held responsible for profit. Since profit is equal to revenue minus expenses, these managers are held accountable for both revenue and expenses attributed to their subunits. An example is a company-owned resturant in a fast-food chain.
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investment center
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held accountable for the subuntis profit and the invested capital used by the subunit to generate its profit. EX. A division of a large corporation
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opportunity cost
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the forgone benefit that could have been realized from the best alternative use of a resource, these are also relevant costs
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sunk costs
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past payments for resources that cannot be changed by any current or future decision, these are irrelevant costs
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product costs
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costs assigned to goods that were either purchased or manufactured for resale. Includes transportation-in costs, assembly line workers wages, and overtime pay for assembly line workers
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period costs
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costs that aren't product costs, identified with the period of time in which they are incurred rather than with units of purchased or producted goods. They are recognized as expenses during the time period in which they are incurred. These include sales commision, office rent, salaries for supervisors, heating and air in office, property taxes, and top exec salaries.
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unit level
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these are each individual unit of product or service, cost for direct materials, such as fabric or electricity to run production equipment. These costs are incurred for every unit of product manufactured or service produced.
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batch level
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incurred for every batch of product or service produced. Set up costs for production runs, material-handling costs incurred to deliver batch quantities of raw material to the production area
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product level costs
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are incurred for each line of product or service, design costs for a line of backpacks, things that specify size, color, number of accessory
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facility level costs
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incurred to maintain the organization's overall facility and infrastructure. EX. the production managers salary, depreciation on plant, insurance on facility and equipment
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customer level costs
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costs incurred for specific custmers. EX. costs to obtain licenses of university logos,
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Contribution Margin
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Sales-All VC
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Target Profit
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FC+Oper Inc b4 tax/ WAUCM
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Break Even Point
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FC/ Cm/unit (WAUCM)
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sensitivity analysis
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one of the most common methods of assesing risk, it tests a financial model for changes in outcomes caused by changes in each of the model's parameter. It answer the question:what if the parameters change?
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