Test 2
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| Activity index | the activity that causes changes in the behavior of costs.
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| Break-even point | level of activity at which total revenues equal total costs. Fixed costs/ contribution margin per unit = break-even point in units.
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| Contribution margin | amount of revenue remaining after deducting variable costs.
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| Contribution margin per unit | amount of revenue remaining per unit after deducting variable costs; calculated as unit selling price minus unit variable cost.
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| Contribution margin ratio | the contribution margin per unit divided by the unit selling price.
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| Cost behavior analysis | the study of how specific costs respond to changes in the level of business activity.
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| Cost-volume-profit (CVP) analysis | the study of the effects of changes in costs and volume on a company's profits.
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| Cost-volume-profit (CVP) graph | A graph showing the relationship between costs, volume, and profits.
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| CVP income statement | classifies costs as variable or fixed and computes a contribution margin.
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| Fixed costs | costs that remain the same in total regardless of changes in the activity level. s activity cha
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| High-low method | classifies mixed costs into fixed and variable components; changein total costs/highminus low activity level= Variable cost per unit.
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| Margin of safety | the difference between actual or expected sales and sales at the break-even point.
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| Mixed costs | costs that contain both a variable element and a fixed element
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| Relevant range | range of the activity index over which the company expects to operate during the year.
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| Target net income | The income objective for individual product lines
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| Variable costs | costs that vary in total directly and proportionately with changes in the activity level.
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| Incremental analysis | The process of identifying the financial data that change under alternative courses of action.
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| Joint costs | For joint products, all costs incurred prior to the point at which the two products are separately identifiable (known as the split-off point).
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| Joint products | Multiple end-products produced from a single raw material and a common production process.
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| Opportunity cost | The potential benefit that may be obtained from following an alternative course of action.
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| Relevant costs | Those costs and revenues that differ across alternatives
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| Sunk cost | A cost that cannot be changed by any present or future decision
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| Theory of constraints | A specific approach used to identify and manage constraints in order to achieve the company's goals.
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| Budget | Formal written statement of management's plans for a specified future time period, expressed in financial terms.
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| Budget committee | A group responsible for coordinating the preparation of the budget.
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| Budgetary slack | Managers intentionally underestimate budgeted revenues or overestimate budgeted expenses in order to make it easier to achieve budgetary goals
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| Budgeted balance sheet | A projection of financial position at the end of the budget period.
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| Budgeted income statement | This budget indicates the expected profitability of operations for the budget period.
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| Cash budget | Anticipated cash flows
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| Direct labor budget | Contains the quantity (hours) and cost of direct labor necessary to meet production requirements.
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| Direct materials budget | The quantity and cost of direct materials to be purchased
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| Financial budgets | the capital expenditure budget, the cash budget, and the budgeted balance sheet. These budgets focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.
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| Long-range planning | Identifies long-term goals, selects strategies to achieve those goals, and develops policies and plans to implement the strategies.
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| Manufacturing overhead budget | The expected manufacturing over-head costs for the budget period.
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| Master budget | A set of interrelated budgets that constitutes a plan of action for a specified time period.
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| Merchandise purchases budget | The estimated cost of goods to be purchased to meet expected sales.
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| Operating budgets | Individual budgets that result in the preparation of the budgeted income statement.
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| Participative budgeting | advantages of participative budgeting are, first, that lower-level managers have more detailed knowledge of their specific area and thus should be able to provide more accurate budgetary estimates.
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| Production budget | The units that must be produced to meet anticipated sales
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| Sales budget | Sales forecast
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| Sales forecast | Potential sales for the industry and the company's expected share of such sales.
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| Selling and administrative expense budget | This budget projects anticipated selling and administrative expenses for the budget period.
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Created by:
kinah1