Chapter 5 Flashcards
Terms and important equations or statements from chapter 5
cost equation
TOTAL COSTS = F + VX
Three methods to estimate costs
- engineering estimates
- account analysis
- statistical methods
what are fixed and variable costs?
Fixed costs are costs that are never changing, the remain constant every period. Variable costs are changing constantly depending on the volume of production.
relevant range
Activity levels within which a given total fixed cost or unit variable cost will be unchanged.
scattergraph
Graph that plots costs against activity levels.
High-low cost estimation=
cost of highest act. level - cost of lowest act. level
highest act. level - lowest act. level
regression analysis
Statistical procedure to determine the relation between variables.
regression =
intercept + (b x LH)
b = coefficient in x terms
LH = labor hours
independent variable
X term, or predictor, on the right-hand side of a regression equation.
dependent variable
Y term or the left-hand side of a regression equation.
correlation coefficient
Measure of the linear relation between two or more variables, such as cost and some measure of activity.
Coefficient of determination
Square of the correlation coefficient, interpreted as the proportion of the variation in the dependent variable explained by the independent variable(s).
learning phenomenon
Systematic relationship between the amount of experience in performing a task and the time required to perform it.
learning curve
y = ax^b
y = total time or cost per unit
a = initial time or cost of initial quantity
x = cumulative units of production
b = learning curve coefficient
