CH 6 Flashcards
Total Variable Cost Definition
The total variable cost incurred as more units are produced.
Total Variable Cost Curve Shape
Linear positive line originating from (0,0)
Variable cost per unit Definition
Variable cost per unit as more units are produced.
Variable cost per unit curve shape
constant, straight horizontal line; fixed rate.
Total fixed cost definition
total fixed cost as more unit are produced.
Total fixed cost curve shape
constant, straight horizontal line; fixed.
Fixed cost per unit definition
fixed cost per unit as more units are produced.
Fixed cost per unit curve shape
e^(-x). curve going down but cannot go to zero.
Total mixed cost definition
total mixed cost as units produced increases
Total mixed cost curve shape
linear positive line with some positive constant as the y-intercept.
Mixed cost per unit definition
mixed cost per unit as more units are produced.
Mixed cost per unit curve shape
e^(-x) with some positive constant y-intercept
Relevant Range
the range where costs behave in a certain manner. Definition in regards to fluctuations in a type of costs, which seem sporadic in the long term but are simple in the short term.
Absorption Costing Income statement. Why is it called that?
Sales - COGS = Gross profit
Gross Profit - operating exp. = operating income; called absorption costing because the types of cost (variable, fixed, mixed) get absorbed into one COGS expense.
Contribution Margin Income Statement
Sales - VC = contribution margin
cm - FC = operating income.
Relevant Range
the range where costs behave in a certain manner. Definition in regards to fluctuations in a type of costs, which seem sporadic in the long term but are simple in the short term.
Scattergraph: definition, pros, and cons
Uses a best guess line to approximate the relationship between x and y; simple and intuitive; subjective and inaccurate.
High-low method: definition, pros, cons
Uses the highest and lowest x values of two points to fit the line; simple and intuitive; uses only two data points which may not represent general data trend.
least-squares regression: definition, pros, and cons
uses a statistics package to find a line that minimizes the squared errors; uses all data points and easy; requires more data and assumption and proper analysis.
Cost Equation; what is m, x, b, y, and m*x?
Y = mx +b
