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17 Cards in this Set
- Front
- Back
Account analysis
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a method for analyizing cost behavior in which each account is classified as either variable or fixed based on the analyst's prior knoledge of how thecost in the accoutn hegaves
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activity base
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a measure of whatever causes the incurrence of a variable cost. For example, the total cost of C-ray film in a hospital will increase as the number of x-rays taken increases. There fore the nuber of x-rays i the activity base that explains the total cost of x-ray film
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committed fixed costs
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fixed costs that are difficlut to adjust because they relate to the investment in facilities, equipment, and the basic organizationsl structure of a company
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contribution approach
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an income statement format that is geared to cost behavior. costs are separated into variable and fixed categories rather than being separated according to th funcionts of production, sales and administraton
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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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costs structure
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the relative proportion of fixed, variable and mixed costs in an organization
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curvilinear cost
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a relation between cost and activity that is a curve rather than straight line
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dependent variable
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a varibal ethat respondst to some causual factor; total cost is th dependent variable as represented by the letter Y in th equation Y=a+bx
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discretionary fixed costs
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fixed costs that arise from annual decisions by management to spend in certain fixed cost areas, such as advertising and research
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engineering approach
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a detailed analyis of cost behavior baased on an industrial engineer's evaluation of the inputs that ar required to carry out a particlular activity and of the prices of tose inputs
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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 analysing the change in cost between the high and low levels of activity
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independent variable
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a varibal etat acts as acausea factor' activty is the independ varibale, as represented by the letter X in teh equaion Y=a+bX
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Least-squares regression method
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a method of sepparating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sume of the squared errors
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linear cost behavior
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cost behavior is said to be linear when a strait line is a reeasonable approximation for th relations between cost and activity
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mixed cost
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a cost that contais both variable and fixed cost elements
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relevant range
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the range of activty within which assumptions about variable and fixed cost behavior are valid
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step-variable cost
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the cost of a resource that is obtainable only in large chunks and that increases and decreases only in response to fairly wide chanbes in activity (such as the cost of a maintnence worker)
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