CH 4

Question 1

Define Account Classification

Answer 1

A cost estimation technique that involves systematically classifying a company’s list of cost accounts into fixed and variable categories

Question 2

Contribution margin

Answer 2

Revenues less variable costs

Question 3

Contribution margin statement

Answer 3

An income statement that groups costs by their variability, reporting variable costs and fixed costs as separate line items

Question 4

Cost structure

Answer 4

The proportion of total cost that are fixed and variable

Question 5

High low method

Answer 5

A cost estimation technique that uses two observations pertaining to the highest and lowest activity levels to estimate fixed and variable cost

Question 6

Regression analysis

Answer 6

A statistical method that uses all available observations to estimate fixed and variable costs

Question 7

Relevant Range

Answer 7

A firm’s normal range of operations. Over this range, we expect a stable relation between activity and cost

Question 8

Segment margin

Answer 8

The contribution margin of a segment( e.g., pro, customer, geographical region) less traceable fixed costs