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Managerial Acctng
Exam 1: Ch. 14, 17, 18
| Term | Definition |
|---|---|
| plantwide overhead rate method | uses one overhead rate to allocate overhead costs |
| cost object | product, process, department, or customer to which costs are assigned |
| departmental overhead rate method | uses a different overhead rate for each department |
| activity-based costing (ABC) | cost allocation method that focuses on activities performed; traces costs to activities and then assigns them to cost objects |
| activity | an event that causes the consumption of overhead resources in an entity. |
| activity cost pool | temporary account that accumulates costs a company incurs to support an activity. |
| activity cost driver | variable that causes an activity’s cost to go up or down; a causal factor. |
| unit level activities | activities that arise as a result of the total volume of goods and services that are produced, and that are performed each time a unit is produced |
| batch level activities | activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in a batch; the amount of resources used depends on the number of batches run rather than on the number of units in the batch. |
| product level activities | activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run. |
| facility level activities | activities that relate to overall production and cannot be traced to specific products; costs associated with these activities pertain to a plant’s general manufacturing process |
| activity-based management (ABM) | approach that uses the link between activities and costs for better management decisions. |
| value-added activities | activities that add value to products or services |
| supply chain management | the coordination and control of goods, services, and information as they move from suppliers to consumers |
| customer support activity rate | budgeted customer support cost/budgeted technician miles |
| plantwide overhead rate | budgeted overhead cost/budgeted allocation base |
| allocated overhead plantwide rate | allocated cost per unit = plantwide overhead rate x DLH used |
| departmental overhead rate | budgeted departmental overhead cost/budgeted departmental allocation base |
| activity rate | budgeted activity cost/budgeted activity usage |
| allocate overhead activity rate | allocated cost = actual activity usage x activity rate |
| cost-volume-profit (CVP) analysis | planning method that includes predicting the volume of activity, the costs incurred, sales earned, and profits received. |
| fixed costs | do not change when the volume of activity changes (within a relevant range) |
| variable costs | change in proportion to changes in volume of activity. |
| economies of scale | drop in unit costs as production increases |
| mixed costs | cost that includes both fixed and variable costs. |
| step-wise cost | cost that remains fixed over limited ranges of volumes but changes by a lump sum when volume changes occur outside these limited ranges |
| relevant range of operations | company’s normal operating range; excludes extremely high and low volumes not likely to occur |
| scatter diagram | graph used to display data about past cost behavior and sales as points on a diagram |
| estimated line of cost behavior | line drawn on a graph to visually fit the relation between cost and sales |
| high-low method | procedure that yields an estimated line of cost behavior by using the costs associated with the highest and lowest sales volume. |
| least-squares regression | statistical method for deriving an estimated line of cost behavior that is more precise than the high-low method and the scatter diagram |
| contribution margin | selling price minus variable cost; measures how revenues cover variable costs; the remainder (or contribution) is for fixed costs and any resulting income |
| contribution margin per unit | amount that the sale of one unit contributes toward recovering fixed costs and earning profit; defined as sales price per unit minus variable costs per unit. |
| contribution margin ratio | product’s contribution margin divided by its sale price. |
| break-even point | output level at which sales equal fixed plus variable costs; where income equals zero |
| cost-volume-profit (CVP) chart | graphic representation of cost-volume-profit relations |
| margin of safety | excess of expected sales over the level of break-even sales. |
| dollar sales at target income | fixed costs + target income/contribution margin ratio |
| unit sales at target income | fixed costs + target income/contribution margin per unit |
| sales mix | ratio of sales volumes for the various products sold by a company |
| weighted average contribution margin per unit | the contribution margin per composite unit for a company that provides multiple goods or services; also called contribution margin per composite unit |
| degree of operating leverage (DOL) | ratio of contribution margin divided by pretax income; used to assess the effect on income of changes in sales |
| variable costing income statement | an income statement in which costs are classified as variable or fixed; also called contribution margin income statement |
| variable costing | costing method that includes only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) in unit product costs; also called direct or marginal costing |
| absorption costing | costing method that assigns both variable and fixed manufacturing costs to products; this method is required under U.S. GAAP; also called full costing |
| break even point per unit | fixed costs / contribution margin per unit |
| break even point in dollars | fixed costs/contribution margin ratio |
| margin of safety (dollars) | expected sales - break even sales |
| margin of safety (percent) | expected sales - break even sales/expected sales |
Created by:
ryanriggs18
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