Chapter 18 Flashcards
Absorption costing
a costing method that assigns all manufacturing costs, including direct materials, direct labor, variable overhead, and a share of fixed overhead, to each unit of product.
Contribution margin variance
the difference between actual and budgeted contribution margin.
Contribution margin volume variance
the difference between the actual quantity sold and the budgeted quantity sold multiplied by the budgeted average unit contribution margin.
Dumping
predatory pricing on the international market
Market share
the proportion of industry sales accounted for by a company.
Market share variance
the difference between the actual market share percentage and the budgeted market share percentage multiplied by actual industry sales in units times budgeted average unit contribution margin.
Market size
the total revenue for the industry.
Market size variance
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Markup
a percentage applied to base cost for the purpose of calculating price; the markup includes desired profit and any costs not included in the base.
Monopolistic competition
a market that is close to the competitive market. There are many sellers and buyers, and low barriers to entry, but the products are differentiated on some basis.a market that is close to the competitive market. There are many sellers and buyers, and low barriers to entry, but the products are differentiated on some basis.
Monopoly
a market in which barriers to entry are so high that there is only one firm selling a unique product.
Oligopoly
a market structure characterized by a few sellers and high barriers to entry.
Penetration pricing
the pricing of a new product at a low initial price, perhaps even lower than cost, to build market share quickly.
Perfectly competitive market
a market (or industry) characterized by many buyers and sellers—no one of which is large enough to influence the market; a homogeneous product; and easy entry into and exit from the industry.
Predatory pricing
the practice of setting prices below cost for the purpose of injuring competitors and eliminating competition
Price discrimination
charging different prices to different customers for essentially the same commodity.
Price elasticity of demand
measured as the percentage change in quantity divided by the percentage change in price.
Price gouging
when firms with market power (i.e., little or no competition) price products “too high.”
Price skimming
a pricing strategy in which a higher price is charged at the beginning of a product’s life cycle, then lowered at later phases of the life cycle.
Product life cycle
the time a product exists—from conception to abandonment; the profit history of the product according to four stages: introduction, growth, maturity, and decline.
Sales mix variance
the sum of the change in units for each product multiplied by the difference between the budgeted contribution margin and the budgeted average unit contribution margin.
Sales price variance
the difference between actual price and expected price multiplied by the actual quantity or volume sold.
Target costing
a method of determining the cost of a product or service based on the price that customers are willing to pay. Also referred to as price-driven costing.
Total (overall) sales variance
the sum of the sales price and sales volume variances.
Variable costing
a costing method that assigns only variable manufacturing costs to the product; these costs include direct materials, direct labor, and variable overhead. Fixed overhead is treated as a period cost and is expensed in the period incurred.
