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Accounting 210 > Definitions > Flashcards

Definitions Flashcards

1
Q

associating costs with the type of activity for which that cost is incurred

A

Classification by Function

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2
Q

task performed each time a batch is processed. Volume measure at batch level – depend on # of batches processed, rather than # of units produced. Activity measure # of: PO’s, production orders, setups, material moves.

A

BATCH LEVEL ACTIVITY

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2
Q

increase total sales or decrease the break-even point or both. To decrease break-even point either decrease fixed expenses or increase unit CM. To increase unit CM must either increase selling price or decrease variable cost per unit

A

HOW CAN THE MARGIN OF SAFETY BE INCREASED?

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3
Q

Marketing selling and administration

A

period cost

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3
Q

a segment whose manager is responsible for meeting revenue targets and is considered to have the authority to strongly influence (if not control) revenues.

A

REVENUE CENTRE

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4
Q

2 step system - cost are assigned to products on the basis of activities they consume.

A

ACB COSTING

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4
Q

the price charged when one segment of an organization provides goods or services to another part of the organization

A

TRANSFER PRICE

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5
Q

Manufacturing/nonmanufacturing or product/period

A

Classification by function

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6
Q

small batches or custom production; large variety of different products. E.g. custom homes, auto repair shops, greeting cards, services-accounting, legal, advertising.

A

JOB ORDER COSTING

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7
Q

a cost that differs between 2 alternatives. can be fixed or variable

A

differential costs

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7
Q

costing method. Includes both fixed and variable (fully absorbs overhead costs). Includes: DM, DL and V/F MOH as part unit/product. An “average” cost.

A

FULL ABSORPTION COSTING

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8
Q

Total cost increases as activity increases

A

Variable Cost

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8
Q

those labor hours that can be easily traced to individual units of product

A

DL

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8
Q

investment in long term assets & basic org. structure of a firm.

A

Committed Fixed Cost

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8
Q

the net operating income that an investment centre earns above the required return on its operating assets

A

RESIDUAL INCOME (RI)

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9
Q

Uses only two data points to estimate VC and can produce inaccurate results

A

High-Low method

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9
Q

a segment of an organization whose manager is responsible and accountable for costs, revenues, profits, or investments

A

RESPONSIBIITY CENTRE

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11
Q

per unit cost decrease with increases in activity

A

Fixed Cost

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12
Q

product costing includes: DM, DL and allocated MOH using a predetermined overhead rate = Estimated total MOH/Estimated total allocation rate.

A

NORMAL COSTING SYSTEM

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13
Q

in manufacturing also considered a product/ conversion cost

A

Indirect cost

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14
Q

A cost that has already been incurred and cannot be changed by any decision made now or in the future

A

Sunk cost

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15
Q

amount remaining from sales revenue after all variable costs deducted. to cover fixed cost and earn a profit

A

Contribution Margin

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15
Q

costing method that includes only variable portion of MOH. DM, DL and variable MOH are included as part of the finished unit of product.

A

VAIABLE COSTING

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15
Q

actual overhead costs allocated to units. Actual costs not know until period end (not timely). Unit cost of the same product can fluctuate.

A

ACTUAL COSTING

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16
Q

an individual unit within an organization whose manager has the responsibility to carry out its activities

A

SEGMENT

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17
Q

the profit generated per dollar invested in operating assets. ROI = NOI/AOA OR MARGIN X TURN OVER = NOI/SALES X SALES/AOA

A

RETURN ON INVESTMENTS (ROI)

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18
Q

Total cost remains constant within a relevant range

A

Fixed Cost

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18
Q

the amount available to cover fixed expenses and earn a profit

A

CONTRIBUTION MARGIN

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19
Q

arise from annual decisions to spend in certain fixed cost areas.

A

Discretionary Fixed Cost

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20
Q

varies in response to more than a unit change in activity

A

Step VC

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21
Q

objective and precise and takes all data points into account R2 - variation explained by cost driver. higher the R the more reliable

A

Least square regression method

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22
Q

the relative proportion of fixed, variable and mixed costs in an organization

A

cost structure

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24
Q

Unit Cost is constant

A

Variable cost

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24
Q

uses all data points and visual inspection. Is not precise or duplicable

A

scattergraph method

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25
Q

all costs involved in acquiring or making a product

A

product cost

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25
Q

activity that relates to specific products (testing/design) and carried out regardless of #of batches or units produced. Depend on the # of different Products a firm produces. Activity measure: test time, design time, # part types.

A

PRODUCT LEVEL ACTIVITY

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27
Q

materials used in the finished product that can be easily and economically traced directly to the product. Raw materials

A

DM

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27
Q

a method of computing the break-even point in which the fixed expenses are divided by the contribution margin per unit

A

CM METHOD

29
Q

only “relevant costs are considered in making decisions

A

cost classification by relevance

30
Q

a volume measure (resources consumed vary in direct proportion to # of units produced); an activity is performed each time a unit is produced. Activity measure: mhrs, DLhrs, #units.

A

UNIT LEVEL ACTIVITY

30
Q

Income before income and taxes – also referred to as EBIT earnings before interest and taxes

A

NOI

31
Q

a fixed cost that supports more than one business segment but is not traceable to any one segment.

A

COMMON FIXED EXPENSE/COST

32
Q

cannot be easily be easily or economically traced to a costing object

A

Indirect Cost

33
Q

a segment where the manager is responsible for costs but not revenues, profit or investments. Service units accounting, IT, HR, general admin.

A

COST CENTRE

34
Q

used to apply MOH costs to products. Ideally it should be a cost driver of the overhead cost. DL hours, machine hours.

A

ALLOCATION BASE

35
Q

a first step at improving, same limitations as plant wide allocations but at a departmental level

A

LIMITATIONS OF DEAPARTMENT OVERHEAD ALLOCATION (RATES)

37
Q

Held on the BS and expensed to match the revenue generated from sale

A

product cost

38
Q

a measure of management’s ability to control operating expenses in relation to sales. Margin = NOI/AOA

A

MARGIN

39
Q

a multi-dimensional performance measurement system, which contains measure along at least dimensions: financial; customer, internal business processes; learning & developement

A

BALANCED SCORECARD

39
Q

an organization where decision making is made by a single managers or a small management team

A

CENTRALIZED ORGANIZATION

40
Q

classifying as variable or fixed to assist in in managers predictions

A

Cost classification by behavior

41
Q

cash, accounts receivable, inventory, pp&e, and all other assets held for productive use in an organization

A

OPERATING ASSETS

43
Q

on the differences between alternatives arte relevant

A

Differential Costs

44
Q

cost object - department, division, product, product line, customer, territory

A

Cost classification by traceability

45
Q

Income before income and taxes – also referred to as EBIT earnings before interest and taxes

A

NET OPERATING INCOME

46
Q

a measure of whatever causes the incurrence of a variable cost

A

activity base

48
Q

shows the financial positions of a company at a specific point in time

A

balance sheet

49
Q

varies in direct proportion with output/activity

A

true VC

50
Q

sales generated for each dollar invested in operating assets. TO = SALES/AOA

A

TURNOVER

52
Q

MOH

A

Indirect Cost

53
Q

refers to the relative proportion of fixed and variable costs in an organization. Cost structure impacts profit stability – the higher the proportion of fixed costs the higher the DOL which increases income volatility.

A

COST STRUCTURE

54
Q

units, #batches, #products do not cause these costs to occur. These are the general plant organizational structure cost (insurance, tax, amort, plant mgmt salaries). Activity measure: arbitrary usually DLhrs.

A

FACILITY LEVEL/SUSTAINING ACTIVITY

55
Q

A cost that is never relevant

A

Sunk Cost

56
Q

a fixed cost incurred because of the existence of a particular business segment (a FC that can be directly traced to an individual segment)

A

TRACEABLE FIXED EXPENSES/COST

58
Q

shows the firms earnings over a period of time (usually quarterly or annually)

A

income statement

60
Q

Cost object - department, division, product, product line, customer, territory

A

cost classification by traceability

61
Q

M, DM, DL, MOH

A

product cost

63
Q

inventoriable cost

A

Product Cost

65
Q

Expensed on the IS in the period incurred

A

period cost

65
Q

does not capture difference in consumption of MOH resources; relies on volume based allocation bases (eg DL hours); may lead to cost distortions and inappropriate pricing.

A

LIMITATIONS OF PLANT WIDE ALLOCATION OVERHEAD ALLOCATION

67
Q

A cost that varies in direct proportion to changes in activity level.

A

Variable Cost

68
Q

difficult to adjust in short term, will impair profitability or long-term goals

A

Committed Fixed Cost

70
Q

is the range of activity within which the assumptions made about cost behavior are valid

A

relevant range

71
Q

Inventoriable accts: DM, WIP, FG

A

Balance sheedt

72
Q

an average cost based on a certain volume.

A

Unitized Fixed Costs

73
Q

a tool that helps managers understand the interrelationships between cost, volume, and profit

A

CVP ANALYSIS

74
Q

a measure, at a given level of sales, of how a % change in sales volume will affect profits. DOL = CM$/Net Income$

A

DOL (DEGREE OF OPERATING LEVERAGE)

75
Q

an organizational segment whose manager is responsible for the segment’s profitability and has the authority to strongly influence both cost and revenues

A

PROFIT CENTRE

76
Q

has a significant impact on decision making and planning

A

Cost Structure

77
Q

relevant costs: differential and opportunity Non-relevant costs: sunk costs

A

cost classification by relevance

79
Q

an organization where decision making is not confined to a few top executives but, rather, is spread throughout the organization

A

DECENTRALIZED ORGANIZATION

81
Q

VC = Change in cost/change in activity FC = total cost - VC element Y = a + bx Y = TMC; a = TFC; b = unit variable cost; x = activity level

A

Mixed Cost Formulas

82
Q

continuous flow (gasoline, cement) of homogeneous units results in average costing. Large batch (new auto’s) “discrete process” with distinct units.

A

PROCESS COSTING

83
Q

a measure of how sensitive net income is to a given % change in sales. OL = CM$/Net income$

A

Operating leverage

84
Q

a segment manager who is responsible and accountable for costs, revenues, profits, or investments

A

RESPONSIBILITY CENTRE

85
Q

all costs not included in product costs

A

period cost

87
Q

the level of sales at which profit is zero. The break-even point can also be defined as the point where total sales equals total expenses or as the point where total contribution margin equal total fixed expenses

A

BREAK EVEN POINT

88
Q

the net operating profit after tax that an investment centre earns above the cost of capital. Similiar to residual income.

A

ECONOMIC VALUE ADDED

89
Q

A cost that can be easily and economically traced to a cost object (direct or indirect)

A

Cost classification by tracibility

90
Q

the excess of budgeted (or actual) sales over the break-even volume of sales

A

MARGIN OF SAFETY

91
Q

(full costing)

A

FULL ABSORPTION COSTING

92
Q

all cost associated with manufacturing except DM, DL, Indirect Labor

A

MOH

93
Q

the costs incurred to generate particular revenue should be recognized as an expense in the same period that the revenue is recognized

A

accrual accounting and matching principle

Accounting 210 (1 decks)

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