16-3 - A202 Final Exam Additional Vocabulary Chapter 1:...

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A202 Final Exam Additional Vocabulary Chapter 1: Introduction to Managerial Accounting Strategic positioning – the focus a company takes to create a sustainable competitive advantage. Generally, firms choose one of two strategies: 1) cost leadership, 2) superior products through differentiation Value chain – the set of activities required to design, develop, produce, market, and deliver products and services to customers Cross-functional perspective – understanding the value chain from all aspects of the business (managing to marketing to finance, etc.) Certified Management Accountant (CMA) – a certified management accountant has passed a rigorous qualifying examination, met an experience requirement, and participates in continuing education Chapter 2: Basic Management Accounting Concepts Prime cost – the sum of direct materials cost and direct labor cost Conversion cost – the sum of direct labor cost and overhead cost Raw materials inventory – the amount of inventory in raw materials Work in process inventory – the amount of inventory in WIP Work in process (WIP) – the cost of the partially completed goods that are still being worked on at the end of a time period Finished goods inventory – the amount of inventory in finished goods Gross margin – the difference between sales revenue and cost of goods sold Chapter 3: Cost Behavior Committed fixed costs – a fixed cost that cannot be easily changed Discretionary fixed costs – fixed costs that can be changed relatively easily at management discretion Chapter 4: Cost-Volume-Profit Analysis Variable cost ratio – variable costs divided by sales revenues. It is the proportion of each sales dollar needed to cover variable costs. Operating leverage – the use of fixed costs to extract higher percentage changes in profits as sales activity changes. Leverage is achieved by increasing fixed costs while lowering variable costs. Common fixed expenses – fixed expenses that cannot be directly traced to individual segments and that are unaffected by the elimination of any one segment Direct fixed expenses – fixed costs that are directly traceable to a given segment and,
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16-3 - A202 Final Exam Additional Vocabulary Chapter 1:...

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