A207 Exam 1 Flashcards
Elements of Cost Allocation
- Cost Object
- Cost Driver
- Denominator Volume
- Cost Pool
What is the controllability of Relevant Costs
Always controllable
How do we measure Controllable Costs and Benefits
In relation to the status quo
How do we measure Traceability
Depends on the unit of analysis
Regression Analysis
Makes a number of assumptions about the data and uses all of the data available to estimate fixed and variable costs; used to aggregate factors
What do we look for in a P-Value
A smaller p-value is better
Intercept Value
Our estimate of fixed costs/activities
What do we look for in R-squared
The larger the r-suqared the better
Contribution Margin Equation
Revenue - Variable Costs
Where do we place Manufacturing Overhead
Included in Cost of Goods Sold
Financial Accounting
Focuses on the entire organization, past performance, has specified standards and statements are issued with fixed periodicity
Relevant Costs and Benefits
Costs and benefits that differ across decision options
Variability
Deals with how activities influence costs and benefits
Traceability
The degree to which we can directly relate a cost or benefit to a specific option
Opportunity Cost
The next best option
Variable Cost
Proportional to the volume of activity
Fixed Cost
Does not change as the volume of activity changes
Mixed Cost
Contains both fixed and variable elements
Inventoriable Cost
= DM + DL + VOH + FOH
Product Margin
= Revenues - Variable Costs - Traceable Fixed Costs
Batch-Level Cost
A cost associated with a batch of items; not directly traceable to an individual item within the batch (the cost to set up a machine to run a batch of 5,000 items is a batch-level cost)
Product-Level Cost
Activities that support an entire product line but not necessarily each individual unit (engineering changes made in the assembly line, product design changes, and warehousing and storage costs for each product line)
Unit-Level Cost
Occur every time a service is performed or a product is made (costs of direct materials, direct labor, and machine maintenance)
Cost Margin Ratio
= (Price - Unit Variable Cost)/ Price
