Accounting

what is a sunk cost?

a cost that has already been incurred and cant be changed by any decision made now or in the future

the difference in costs between any two alternatives is known as what

a differential cost

Y=a + bX expresses the relationship between what

a mixed cost and the level of activity

this is an account the account is classified as either as variable or fixed based on the analyst's prior knowledge of how the cost in the account behaves

account analysis

this is a measure of whatever caused the incurrence of a variable and is sometime referred to as a cost driver

activity base

these are executive compensation, general accounting, secretarial, public relations, and similar costs involved in the overall, general administration of the organization as a whole

administrative costs

these include all costs associated with the general management of an organization rather than with the manufacturing or selling

administrative costs

what does the contribution approach provide manages with

an income statement that clearly distinguished between fixed and variable costs and therefore aids planning, controlling, and decision making

what is a differential cost known as?

an incremental cost

where are product costs initially assigned to ?

an inventory account on the balance sheet- also known as inventoriable costs

sunk costs are or are not differential costs?

are not because they cant be changed by any decision and because only differential costs are relevant in a decision, sunk costs should always be ignored

this is also what fixed costs can be viewed as and they represent organizational investments with multiyear planning horizon that can't be reduced even for short period of time without making big changes

committed fixed costs

this is a cost that is incurred to support a number of cost objects but cant be traced to them individually

common cost

the variable cost per unit remains what

constant

the crucial distinction between fixed and variable costs is at the heard of what

contribution approach

this also separates costs into fixed and variable categories

contribution approach

this is the amount remaining from sales revenues after variable expenses have been deducted

contribution margin

this is the sum of direct labor cost and manufacturing overhead cost

conversion cost

this term is used to describe direct labor and manufacturing overhead because they are incurred to convert materials into the finished product

conversion cost

this refers to how a cost reacts to changes in the level of activity

cost behavior

this is anything for which cost data are desired- including products, customers, job, and organizational subunits

cost object

these are common examples of variable costs

cost of goods sold for a merchandising company, direct materials, supplies, and power

the per unit fixed cost what

decreases as the activity level rise and increases as the activity level falls

a difference in revenues between any two alternatives is known as what?

differential revenue

this is a cost tha can be easily traced to a specific cost object

direct cost

this consists of costs that can be easily (both physically and conveniently) traced to individual units of product

direct labor

what are some of the most common activity bases?

direct labor hours, machine-hours, units produced, and units sold

these are materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product

direct materials

most manufacturing companies separate costs into three categories:

direct materials, direct labor, and manufacturing overhead

these are also referred to as managed fixed costs and usually arise from annual decisions by management to spend on certain fixed cost items. examples are advertising, public relations, management development programs

discretionary fixed costs

this approach involves a detailed analysis of what cost behavior should be, based on an industrial engineer's evaluation of the production methods to be used, the materials specifications, labor requirements, equipment usage, production efficiency, power consumption, and so on

engineering approach

the traditional income statement does not distinguish between

fixed and variable costs

these are not affected by changes in activity

fixed costs

this is a cost that remains constant regardless of changes in the level of activity

fixed costs

this method id based off rise over run for the slope of a straight line

high low method

if the scatterplot reveals linear cost behavior, then it makes sense to perform the what?

high-low or least squares regression calculations to separate the mixed cost into its variable and fixed components

this is a cost that cant be easily and conveniently traced to a specified cost object

indirect

labor costs that can't physically be traced to products or that can be traced only at great costs and inconvenience are what

indirect labor

these are some other names used for manufacturing overhead:

indirect manufacturing costs, factory overhead, and factory burden

these are included as part of manufacturing overhead like solder and glue

indirect materials

outside of the relevant range, what happens with a fixed cost?

it may no longer be strictly fixed or a variable cost may not be variable

what are some examples of indirect labor

janitors, supervisors, materials handlers, and night security guards

this includes items such as indirect materials, indirect labor, maintenance and repairs on production equipment and heat and light, property taxes, depreciation, and insurance on manufacturing facilities

manufacturing overhead

this is the third element of manufacturing cost and it includes all manufacturing costs except direct materials and direct labor

manufacturing overhead

the cost involved in producing one more unit of product is called what?

marginal cost

at southwest airlines, maintenance costs are a ____ cost

mixed

this contains both variable and fixed cost elements

mixed cost

only the costs associated with _______ the factors are included in manufacturing overhead

operating

potential benefit that is given up when one alternative is selected over another

opportunity cost

what are selling costs sometimes often called?

order-getting and order-filling costs

these are all the costs that are not product costs. all selling and administrative expenses are treated as this

period costs

these are not included as part of the cost of either purchased or manufactured goods, instead they are expenses on the income statement in the period in which they are incurred using the usual rules of accrual accounting

period costs

this is the sum of direct material costs and direct labor costs

prime cost

these include all costs involved in acquiring or making a product. "attach" to units of product as the goods are purchased or manufactured and they remain attached as the goods go into inventory awaiting sale

product costs

the plastics produced by Du Pont are a ___ material used by hewlett-packard in its personal computers

raw

this is the materials that go into the final product

raw materials

this is the range of activity within which the assumption that cost behavior is strictly linear is valid

relevant range

these are examples of ___ costs: advertising costs, shipping, sales travel, sales salaries

selling costs

these include all costs that are incurred to secure customer orders and get the finished product to the customer

selling costs

what are the two categories non-manufacturing costs are divided into?

selling costs and administrative costs

what are non-manufacturing costs often called

selling, general, and administrative costs

variable cost is the same as the what

slope of the line Y2-Y1/X2-X1

cot behavior patterns such as salaried employees are often called what

step-variable costs

what are some example of fixed costs?

straight-line depreciation, insurance, property taxes, rent, supervisory salaries, admin. sales, and advertising

the variable portion of a mixed cost is what

the cost incurred for the actual consumption of the service thus it caries in proportion to the amount of service actually consumed

period with the lowest level of activity is selected as what point

the first

these two methods estimate the fixed and variable elements of a mixed cost by analyzing past records of cost and activity data

the high-low and least-squares regression

X=?

the level of activity

the fixed portion of a mixed cost represents what?

the minimum cost of having a service ready and available for use

product costs are treated as expenses in the the period in which what?

the related products are sold

a=?

the total fixed cost

Y= what?

the total mixed cost

assume that the activity base is what?

the total volume of goods and services provided by the organization

b=?

the variable cost per unit of activity

why are raw materials misleading?

they refer to any materials that are used in the final product and the finished product of one company can become the raw materials of another, but it seems to imply unprocessed natural resources like wood

this cost varies in total in direct proportion to changes in the level of activity

variable cost

are discretionary fixed costs be cut for short periods of time with minimal damage to the long-run goals of the organization?

yes