VARIABLE AND ABSORPTION COSTING Flashcards
a study of how the costs respond to change s in activity levels
cost behavior
item or events that has a cause or effect relationship with the incurrence of a cost
cost driver
anything for which cost is computed (para kanino ba yan)
per per mo
cost object
a grouping of individual cost items
cost pool
arrange cost driver, pool, and object
cost pool —- cost driver—— cost object
width or span of activities where the relationships of costs and the cost formula are valid, predictable and linear
Relevant range
Y = a + bx
Y = Total cost/ mixed cost
A = Total fixed cost B = variable cost per cost driver x = cost driver
A = y intercept
B = slope x = independent variable y = dependent variable
Cost classification
- Inventoriability
- Behavior (relate to activity level)
- Product cost (DM. DL, FOH: IDM, IDL, Other FOH)
Prime cost (DM + DL) vs. Conversion Cost (DL+ FOH) - Period cost
-Variable
-Fixed
-Mixed*
naming convention was taken after their TOTAL
*Mixed Costs
pag in total (behaves like Total Variable Cost)
pag per unit (behaves like Fixed cost per cost driver)
METHODS OF SEGREGATING MIXED COSTS
ACES
Account analysis (one person involved)
Conference (group/ team)
Engineering (most costly; input, process, output)
Scattergraph/ visual fit (observe the outliers)
High-low (crude/ simple reasonable cost estimated within relevant range)
HTC- LTC/ Highest act- Lowest act)
Least square/ Regression (all data points, precise cost est)
eyna bex
exy exa bx2
Correlation
Correlation analysis
3
correlation of coefficient
extent of linear relations
-1 to +1
inverse or direct
Coefficient of determination r2
0 to +1
the closer to 1 the stronger the relationship
Standard error of estimate
measure of variation of of an observation around the regression line
Absorption Costing
Full conventional GAAP PFRS Traditional
Variable Costing
Marginal
Non-GAAP
Direct
