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20 Cards in this Set
- Front
- Back
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total fixed costs and variable fixed cost per unit
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remain the same no matter what!
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total var cost
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inc. as production inc.
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fixed cost per unit
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dec. as production inc
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committed cost
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a cost that results from an org's ownership or use of facilities and its basic org structure
hard 2 get out of of ex;stores that rent space in mission valley |
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cost behavior
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relationship between cost and activity
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cost driver
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characteristic of an activity/event that results in the incurrence of costs by that activity/event
the best way 2 divi up a cost |
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differential cost
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diff. in cost item under 2 decision alternatives
difference between 2 options |
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operating leverage
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extent 2 which an organization uses fixed cost in its cost structure. the greater the proportion of fixed costs, the greater the outlier. [MORE FC, HIGHER THE LEVERAGE]
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Traditional Income Statement
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difficult 2 use b/c it does not separate var cost and fix cost
preferred for the cross profit analysis |
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contribution Income Statement
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authors prefer this method b/c it seperates cost by var and fixed
better 4 cost-volume profit analysis |
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capital budget
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long term budget for property, plant and equip.
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Financial budget
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plan of financial resources where the financing comes from selling stocks, certificates for cash
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Rolling/Continuous budget
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once a abiget expires, it is replaced
ex. once jan 2009 budget is expired a new one for jan 2010 will be created |
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order of budget
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1. sales forecast[ is not a budget but still comes first]
2. Sales Budget 3.production budget 4. DM Budget 5. OH budget 6.Selling&Admin budget Last: Budgeted Fin. statements income statement balance sheet(last budget) statement of cash flows |
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zero-base budgeting
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budget starts at 0 and every item must be justified
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base budgeting
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already has a budget and then items are added
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Budget Purposes
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plan
communicate and coordinate allocate performance and incenti9ves |
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Relevant Range
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FC remain the same, VC per unit stays the same
outside of the relevant range, FC change and Var. cost per unit change due 2 economies of scale |
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low operating leverage
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var. cost per unit will be higher
total fixed cost will be lower |
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high operating leverage
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var, cost per unit will have a higher cost
total fixed cost will be higher |
