FINAL Flashcards
Defn: A cost that increases or decreases in total in direct proportion to the amount of a good or service produced.
Variable cost
Defn: A cost that remains the same in total, regardless of the amount of a good or service produced by a firm.
Fixed cost
A method used to separate costs into their fixed and variable components, using the highest and lowest activitiy levels.
High-Low Method
The income amount that contributes to covering the fixed costs and then to providing operating income.
Contribution margin
The ratio of contribution margin to net sales revenue.
Contribution Margin Ration (CMR)
The income statement that groups cost by behavior - variable or fixed - and highlights the contribution margin
contribution margin income statement
The sales level at which operating income is zero. Total revenue is equal to total costs.
breakeven point
An excess of expected sales over breakeven sales; the amount sales can decrease before the company incurs an operating loss.
margin of safety
A budget prepared for only one level of sales volume.
static budget
The difference between an actual amount and the budgeted amount
variance
A budget prepared for various levels of sales volume
flexible budget
This variance measures how well the business keeps unit costs of material and labor inputs within standards.
cost variance
This variance measures how well the business uses its materials or human resources.
efficiency variance
The price, cost, or quantity that expected by a business under normal conditions.
standard
