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Organizational-Level Cost
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...
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Executional Activities
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Using employees
Providing quality
Providing plant layout
Designing and producing products
Providing capacity
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breakeven quatity=(F+$0)/CM
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breakeven poin quantity equation
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materials used
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wip control; materials control, materials eff. var.
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Distribution
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delivering products or services to customers
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Master Budget
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expression of MANAGEMENT'S OPERATING AND FINANCIAL PLANS for a specified period (usually a fiscal year) and INCLUDES A SET OF BUDGETED FINANCIAL STATEMENTS
M_____ B______
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3 categories of corporate costs
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1-treasury costs2-human-resource-management costs3-corporate-administration costs
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Budgeted Cost
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predicted or forecasted cost (future cost) as distinguished from an actual or historical cost
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MOH Costs
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all allocated manufacturing costs of cost object
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Uncertainty
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the possiblity that na actual amount will deviate from an expected amount
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Goal Congruence
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Exists when individuals and groups work toward achieving the organization's goals. Managers working in their own best interest take actions that align with the overall goals of top management (everyone working in harmony to achieve the company's goals).
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Contribution margin
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The amount remaining from sales revenues after all variable expenses have been deducted.
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customer-profitability analysis
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reporting and analysis of revenues earned from customers and the costs incurred with making them
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Normal volume
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adj. theoretical capacity for long-run product demand over a multiple yr. period
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Practical Capacity
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the level of capicity that reduces theoretical capacity by unavoidable operating interruptions such as scheduled maintanence time, shutdowns for holidays, and so on.
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Contribution Margin Ratio
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Contribution margin per unit divided by selling price
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Target Price
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Estimated price for a product or service that potential customers will pay
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Management by Exception
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focusing attention on areas not operating as expected (budgeted)
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High-low method of analysis
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Numerator: High-low costs associated with the cost driver
Denominator- High-low activity
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operating plans
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the various actions taken and results achieved over a period of time
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slope coefficient
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coefficient term in a cost estimation model that indicates the aomunt by which total cost changes when a one-unit change occurs in the level of activity within the relevant range
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MoS %
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MoS in $ / Budgeted (actual) Revenue [Revenue would have to decrease by the MoS % to reach the BE Revenue]
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Added to EFU
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How does Abnormal Spoilage affect EFU calculation?
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Cost-based transfer prices
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Top management may choose a transfer price based on the cost of producing the product in question. The cost used in cost-based transfer prices can be actual or budget costs.
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High-low method
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A method of separating a mixed cost into its fixed and variable elements by analyzing the change in cost between the high and low activity levels.
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sales-mix variance equation
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(actual units of all products sold)x (actual sales mix % - budgeted sales mix %) x budgeted CM/unit
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Break Even Point
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when total revenue = total cost, Op Income = 0
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Assumptions of CVP analysis
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selling price is constant, costs are linear and can be accurately divided into variable (constant per unit) and fixed (constant in total) elements, in multiproduct companies the sales mix is constant, in manufacturing companies inventories do not change (units produced=units sold)
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3 characteristics of FIFO
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1-keep layers separate for prior and current periods2-beginning WIP Is kept separate from current period starts and finishes3-EUP computations: only for current period work
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How can CVP analysis assist managers?
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CVP analysis assits managers in understanding the behavior of a product's or service's total costs, total revenues, and operating income as changes occur int he output level, selling price, variable costs, or fixed costs.
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Certified in Financial Management (CFM)
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certifies that the holder has met the admission criteria and demonstrated the competency of technical knowledge in financial management required by the Institute of Management Accountants
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WHat are the six steps to estimate a cost function
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choose the dependant variableidentify the cost drivercollect data on the dependent variable and the cost driverplot the dataestimate the cost functionevaluate the cost driver of the estimeated cost function
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