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33 Cards in this Set
- Front
- Back
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Term for describing whether and how a cost changes when level of output changes |
Cost behavior |
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Causal factor that measures output of activity leading to change in cost |
Cost driver |
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Range of output over which cost relationship is valid |
Relevant range |
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Costs that in total don’t change when level of output changes; usually large amts |
Fixed costs |
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Fixed costs that can change or be avoided at mgmt discretion |
Discretionary fixed costs |
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Fixed costs that aren’t easily changed; big purchases or contract |
Committed fixed costs |
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Costs that in total change in direct proportion to level of output changes w/i the relevant range |
Variable costs |
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Variable costs that can be changed or avoided at mgmt discretion |
Discretionary variable costs |
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Formula- variable rate (VR) X units of output (UOP) |
Total variable cost |
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Variable cost whose rate of change is not constant |
Semi-variable cost |
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Costs with both fixed and variable components |
Mixed costs |
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Formula- FC+ VC |
Total cost |
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Costs that display constant level for range then jump higher for same range; “narrow” steps indicate variable costs |
Step costs |
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Three methods of separating mixed costs into fixed and variable |
High-low Scattergraph Method of least squares (regression) |
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Formula- Tot FC+ (VR x UOP) |
Total cost |
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Variable whose value depends on another variable |
Dependent variable |
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Explains changes in another variable and doesn’t depend on another |
Independent variable |
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Graph- corresponds to FC Y-axis (Cost line meets cost) |
Intercept |
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Graph- corresponds with variable rate X-axis |
Slope |
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Method of sep. FC & VC by using high and low data points; quick info to estimate cost behavior for mgrs |
High-low method |
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4 steps of hi-low method |
H, L VR= (hc-lc)/(ho-lo) FC=hc-(VRxho) or lc-(VRxlo) TC formula |
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Adv of hi-low |
Objectivity Quick overview Easy |
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Disadv of hi-low |
Outliers Inaccuracy |
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Method for cost relationship by plotting data points on a graph; adv-visual of data; disadv-lack of objectivity |
Scattergraph |
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Statistical method of plotting data points to find the best fitting line; adv-objective, easy; disadv- complicated |
Method of least squares (regression) |
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Most widely used method in practice of determining cost behavior |
Manag judgment |
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2 methods of measuring income |
Absorption costing Variable costing |
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Assigns all manfactur costs to product; Full costing |
Absorption costing |
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Assigns only variable manufac costs to the product, treating fixed OH as period expense; used only in internal reports for decision-making |
Variable costing |
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Inventory cost (always, never) includes the period costs of selling/admin. |
NEVER |
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Formula- DM + DL + MOH (all) |
Absorption-costing product cost |
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Formula- DM + DL + VOH (only) |
Variable-costing Product Cost |
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The percentage of variability in the dependent variable explained by an independent variable |
Coefficient of determination (R squared) |
