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45 Cards in this Set
- Front
- Back
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traceability |
the degree a cost or benefit can be related to the decision option |
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direct costs or benefits |
uniquely relate to the decision option, measurable |
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indirect costs or benefits |
relate to the decision option, but no fully traceable, too difficult to measure, AKA common costs |
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the decision making framework |
define goal, identify, analyze, choose |
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opportunity cost |
value of the next best option |
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planning and control cycle |
plan, implement, evaluate, revise |
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relevant costs or benefits |
differ between alternatives |
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as the time horizon gets _____, costs become more controllable |
longer |
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a cost or benefit is controllable if: |
it can be avoided by NOT picking the option |
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sunk costs |
incurred in the past and are not relevant, not controllable |
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direct costs of pizza |
ingredients and direct labor |
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indirect costs of pizza |
utilities, rent, corporate offices |
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variability |
how an activity influences a cost or benefit; how a cost behaves |
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variable costs |
change in total with each unit produced. ex. flour in pizza |
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fixed costs |
do not change in total with each unit produced. ex. CEO salary, rent |
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mixed costs |
both variable and fixed. ex. cellphone plans |
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step costs |
stay at the same level for a certain activity range then ump to a higher amount if the volume increases. ex. rental van |
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for more detail (than FVMS) we use the cost hierarchy: |
unit, batch, product, facility level |
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unit level |
increase or decrease in direct proportion to the number of units produced (variable costs) ex. the cookie |
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batch level |
depends on the number of batches produced (setup costs) ex. batch of cookies |
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product level |
relates to specific products. ex. advertising, a type/flavor of cookie |
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facility level |
fixed costs to operate factory/sustain the organization. ex. rent, Chips Ahoy organization |
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equation for raw materials |
beginning balance + DM purchased - DM used= ending balance |
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equation for workInProgress |
beginning balance + DM used + direct labor + Manufacturing overhead - COGManufactured= end balance |
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equation for finished goods |
Beginning balance + COGManufactured - COGS=end balance |
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equtation for prime costs |
DirectLabor + DirectMaterialsUsed |
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equation for conversion costs |
direct labor + manufacturing overhead |
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equation for gross margin |
revenue - COGS |
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product costs |
all costs that are associated with getting products and services ready for sale. AKA COGS, inventoriable costs |
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period costs |
costs that are not product costs are not related to getting products or services ready for sale. AKA selling and admin costs |
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manufacturing overhead |
indirect factory-related costs that are incurred when a product is manufactured. ex. oil for paint, rent on manufacturing building |
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inventoriable costs equation |
= DirectMaterials + DirectLabor + Mfg OH |
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cost allocation mechanics |
cost pool, cost object, cost driver, denominator volume |
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allocation rate equation |
cost pool/denominator volume |
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cost driver |
method of allocation. per item, per person, etc. |
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denominator volume |
add up your cost drivers. ex. 20 doctors if per person |
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cost object |
??? |
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cost pool |
the group's expenses that will are to be allocated |
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high-low method |
(TC at high activity - TC low)/(highvolume-low) |
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regression analysis method |
intercept-value of the fixed costs rsquare- 0<x<1, closer to 1 is better pvalue-want lower than .05 |
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margin of safety |
(current sales - breakeven sales)/current sales the higher the lower the risk |
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operating leverage |
FC/TC, the higher the % the higher the risk
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breakeven equation |
0=(CMratio*Revenue)-FC |
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gross margin-period costs=? |
profit before taxes |
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formula for calculating profit |
(FC+targetprofit)/CM per unit |
