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38 Cards in this Set
- Front
- Back
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cost behaviour refers to how a cost will react or change as changes in what take place? |
changes in the level of business activity |
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in Y = F + VX , what does V represent? |
variable cost per unit of the activity variable |
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the relative proportion of fixed, variable, and mixed costs found in an organization = ? |
cost structure |
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a measure of whatever causes a variable cost to be incurred = ? |
activity base |
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what are the most common activity bases? |
direct labour hours, machine hours, units produced, units sold |
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what is a step variable cost? |
a cost that is obtainable only in large amounts and that increases and decreases only in response to fairly wide changes in the activity level |
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what are the 2 different types of fixed costs? |
discretionary costs and committed costs |
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fixed costs arising from annual management decisions (i.e. advertising costs) = ? |
discretionary costs |
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fixed costs which are long term investments (i.e. buildings, equipment costs, depreciation, salaries) = ? |
committed costs |
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the process of determining how a particular cost behaves = ? |
cost estimation |
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what are the two different ways to estimate fixed and variable components of a mixed cost? |
account analysis and engineering approach |
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a qualitative assessment of whether the relationship between the independent and dependent variables in a cost estimation model makes sense from an economic perspective = ? |
economic plausibility |
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using the contribution approach, the income statement is formatted by separating costs into what? |
variable and fixed costs |
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the amount remaining from sales revenues after all variable expenses have been deducted = ? |
contribution margin |
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what are the 3 different methods of diagnosing cost behaviour? |
scattergraph, high-low method, least squares regression |
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which method uses 2 data points- the highest and the lowest activity levels and their corresponding costs? |
high-low method |
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C-V-P helps managers understand the relationships among costs, volume, and profit. Focuses on how profits are affected by the following 5 elements: p_____ of products, v________ or level of activity, per unit ________ cost, total ________ costs, _____ of products sold |
price. volume. variable. fixed. mix. |
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CM is used first to cover ________ expenses, and then whatever remains goes towards profit |
fixed |
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profit = __________ - __________ - ___________ |
revenue - total VC - total FC |
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what is the CM ratio? |
CM / sales |
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break even can be computed using either the _________ method or the __________ method |
equation or formula |
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what is the contribution formate income statement in equation form under the equation method? |
profit = (sales - vc) - fc |
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B/E point in units sold = ? |
FC / unitCM |
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B/E point in total sales dollars = ? |
FC / CM ratio |
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the excess of budgeted (or actual) sales over the break even volume of sales = ? |
margin of safety |
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? = total budgeted (or actual) sales - B/E sales |
margin of safety |
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a measure of how sensitive operating income is to a given percentage change in sales. It is computed by dividing the CM by operating income = ? |
operating leverage |
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what is sensitivity in operating leverage due to? |
the relative portion of FC to VC. the higher the FC relative to the VC, the greater the impact on income given a change in sales revenue |
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the relative proportion in which a company's products are sold = ? |
sales mix |
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VC using high-low method = |
Y2-Y1 / X2-X1 |
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Profit = |
revenue - total VC - total FC |
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cm ratio = |
cm / sales |
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BE in units sold = |
fixed expenses / unit cm |
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BE in total sales dollars = |
fixed expenses / cm ratio |
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margin of safety = |
total budgeted sales - BE sales |
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margin of safety percentage = |
margin of safety in dollars / total budgeted sales |
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operating leverage = |
cm / income |
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before tax income = |
after tax income / (1-t) |
