Ch. 21 Flashcards
What is cost volume profit formula
(Sales price-variable cost) x quantity)- Fixed cost
What are the two assumptions made in ch. 21
- Fixed costs remain constant
- Costs can be classified as either fixed or variable
- Product mix remains constant
- Total cost and revenues are linear
- Volume is the only factor considered in the model
A unit budget allowance for the cost of a given component
Standard Cost
A cost incurred to execute long term decisions
Committed costs
A cost that can be adjusted in the short term by management
Discretionary cost
Lower level managers provide significant input into the goals and budgets
Participative budget
Starts with the previous period’s budget and adds or subtract Ms a % to generate the current period’s budget
Incremental Budget
Requires all budget constituencies to justify their budget needs each period
Zero-based budget
The term of the budget stays constant
Rolling budget
What do flexible budgets do that is better than static budgets
Adjusts as production changes
Upper-management establishes the goals and budgets and imposes them on the organization
Top-down
