Cost 3 Flashcards
Static Budget Variance
Difference between the actual result and the corresponding budgeted amount in the static budget.
Static Budget
Based on the level of output planned at the start of the budget period. Single planned output level.
Flexible Budget
Calculates budgeted revenues and budgeted costs based on the actual output in the budget period. AQ x AP.
Cost Equation
y=a+bx
Regression Analysis
Statistical method that measures the average amount of change in the dependent variable associated with a unit change in one or more independent variables.
Percent Standard Error
Standard error / average of dependent variable. Looking for around 10%.
T-stat
Use number for actual driver, not intercept. If under 2, not bringing anything new.
F-test
Significant if significance is below .05
Goodness of Fit
R Square. Output dot graph with small vertical differences between the actual costs and predicted costs has a better goodness of fit.
Linear Cost Function
Cost function in which the graph of total costs versus the level of a single activity related to that cost is a straight line within the relevant range.
Relevant Range
Band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question.
Multicollinearity
Exists when two or more independent variables in a multiple regression model are highly correlated with each other.
Independent Variable
Level of activity or cost driver used to predict the dependent variable (costs) in a cost estimation or prediction model.
Dependent Variable
The cost to be predicted.
Conversion Costs
All manufacturing costs other than direct material costs.
