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66 Cards in this Set

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Moving Inventory

An example of a non value-added activity

Activity-based Costing

The costing method that first assigns costs to activities, and then assigns them to products based on the products' consumption of activities


Cost Accounting

Type of accounting that emphasizes relevancy over comparability

Value Chain

The linked sequence of activities that create value for the customer

Differential Revenue

Revenue that changes in response to a particular course of action

Just-In-Time Method

An inventory flow system that minimizes the amount of inventory on hand

Cost Driver

A factor that causes cost

Total Quality Management

The method by which an organization seeks to excel in all demensions, with the customer defining quality.


The process of measuring a company's products and activities against competitors' performance

Differential Cost

A cost that changes in response to a particular course of action

Value-added Activity

A unit of work that contributes to a product's ability to satisfy customer needs

Cost-Benefit Analysis

The process of comparing the benefits with the costs associated with a proposed change

Responsibility Center

A unit of an organization assigned to a manager who is held accountable for its operations

Contribution Margin

Sales less variable costs

Variable Cost

Costs that vary in direct proportion with changes in the activity level


A sacrifice of resources

Gross Margin

Revenue less cost of goods sold


The cost charged against revenue in a particular accounting period

Product Cost

Costs assigned to products that are expensed when the unit is sold

Semivariable Cost

Costs that have a fixed AND variable component

Phone Bill

Indirect Cost

Costs that cannot be directly related to a cost object

Direct Cost

Costs that can be directly related to a cost object

Operating Leverage

The extent to which an organization's cost structure consists of fixed costs

Fixed Cost

Costs that remain the same in total regardless of the activity level

Step Cost

Costs that increase with volume in steps

Opportunity Cost

The lost benefit from the best forgone alternative

Outlay Cost

Past, present, or near future cash flow

Full Absorption Costing

Manufacturing costs used to calculate inventory value under GAAP

Period Cost

Costs that can be easily attributable to time intervals

Operating Profit Formula

Total Revenues - Total Costs

Profit = TR - TC

Total Revenue Formula

Price × Units of output produced and sold


Total Costs Formula

(Variable costs per unit × Unit of output) + Fixed Costs

TC = VX + F

Total Contribution Margin Formula

Total sales - Total variable costs

Total Contribution Margin = P - V

Unit Contribution Margin Formula

Unit Selling Price - Unit Variable Cost

Contribution Margin Ratio Formula

Unit Contribution Margin ÷ Unit Sales Price

Break-even Point in Units Formula

Fixed Costs ÷ Unit Contribution Margin

Break-even Point in Sales Dollars Formula

Fixed Costs ÷ Contribution Margin Ratio

Target Volume in Units Formula

(Fixed Costs + Target Profit) ÷ Contribution Margin

Target Volume in Sales Dollars Formula

(Fixed Costs + Target Profit) ÷ Contribution Margin Ratio

Margin of Safety Formula

Sales Volume - Break-even sales Volume

Margin of Safety Percentage Formula

Margin of Safety ÷ Sales

Differential Analysis

Method used to determine how costs will be affected if one alternative is chosen over another

High-low Cost Estimation

Method of estimating costs based on the highest and lowest points in the data set

Engineering Estimate

Method of cost estimation that utilizes a detailed step-by-step analysis of the process involved


Graph that plots costs against activity levels

Relevant Range

Range of data over which assumptions are assumed to be valid

Account Analysis

Method of estimating costs that reviews each account making up the total cost being analyzed

Sunk Costs

Costs incurred in the past that cannot be changed by present or future decisions.

Operation Costing

Hybrid costing system used in manufacturing goods that have some common characteristics.

Cost Management System

System to provide information about the costs of process, products, and services used and produced by an organization

Job Costing

Accumulates cost for a particular job which is uniquely identifiable.

Predetermined Overhead Cost

Cost per unit of the allocation base used to charge overhead to products

Cost Flow Diagram

Picture representing the flow of costs to each product

Continuous Flow Processing

System that generally mass-produces a single homogeneous output in a continuous process

Allocation Basis

The link that connects activity to the level of overhead incurred

Process Costing

Assigns costs to indistinguishable products as they pass through a series of unique processes

Two-stage Cost Allocation

Process of first allocation costs to intermediate cost pools and then to the individual cost objects using different allocation bases.

Master Budget

Financial plan of an organization for the coming year or other planning period

Organizational Goals

Company's broad objectives established by management that employees work to achieve


Financial plan of the resources needed to carry out activites and meet financial goals

Participative Budgeting

Use of input from lower and middle management employees

Delphi Technique

Forecasting method in which individual forecasts of group members are submitted anonymously and evaluated by the group as a whole

Budgeted Balance Sheets

Statement of budgeted financial position

Production Budget

Production plan of resources needed to meet current sales demand and ensure that inventory levels are sufficient for future sales

Strategic Long-range Plan

Statement detailing steps to take to achieve a company's organization goals

Trend Analysis

Forecasting method that ranges from simple visual extrapolations of point on a graph to highly sophisticated computerized time series analysis