Term
| the method of assigning costs is essentially the same in a job order and a process cost system |
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Definition
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Term
| the method of accumulating cost is essentially the same in a job order and a process cost system |
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Definition
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Term
| Machine hours are widely used in allocating manufacturing overhead costs in a process cost system |
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Definition
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Term
| Activity-based costing allocates overhead to multiple cost pools and assigns the cost pools to products using cost drivers |
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Definition
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Term
| A cost driver does not generally have a direct cause-effect relationship with the resources consumed |
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Definition
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Term
| To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool |
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Definition
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Term
| The first step in activity-based costing is to assign overhead costs to products, using cost drivers |
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Definition
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Term
| ABC eliminates all arbitrary cost allocations |
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Definition
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Term
| In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed cost will always remain constant |
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Definition
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Term
| A special one-time order should never be accepted if the unit sales price is less than the unit variable cost |
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Definition
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Term
| A company should never accept an order for its products at less than its regular sales price |
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Definition
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Term
| If a company is operating at less than capacity, the incremental costs of a special order will likely include variable manufacturing costs, but not fixed costs |
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Definition
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Term
| An opportunity cost is the potential benefit obtained by using resources in an alternative course of action |
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Definition
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Term
| The basic decision rule in a sell or process or process further decision is: process further if the incremental revenue from processing exceeds the incremental processing costs |
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Definition
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Term
| In a decision to retain or replace old equipment, the salvage value of the old equipment is relevant in incremental analysis |
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Definition
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Term
| If an unprofitable product is eliminated, fixed expenses allocated to the eliminated segment will likely be eliminated |
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Definition
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Term
| A variable cost remains constant per unit at various levels of activity |
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Definition
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Term
| A fixed cost remains constant in total and on per unit basis at various levels of activity |
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Definition
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Term
| Changes in the level of activity will cause unit variable and unit fixed costs to change in opposite directions |
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Definition
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Term
| For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity |
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Definition
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Term
| Contribution margin is the amount of revenues remaining after deducting cost of goods sold |
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Definition
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Term
| The margin of safety tells a company how far sales can drop before it will be operating at a loss |
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Definition
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Term
| Sales mix is not important to managers when different products have substantially different contribution margins |
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Definition
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Term
| The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm |
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Definition
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Term
| The break-even point in dollars is variable costs divided by the weighted-average contribution margin ratio |
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Definition
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Term
| When a company has limited resources to manufacture products, it should manufacture those products which have the highest contribution margin per unit at the product level |
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Definition
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Term
| Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs |
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Definition
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Term
| An assumption of CVP analysis is that all costs can be classified as either variable or fixed |
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Definition
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Term
| The trend in most companies is to have more variable costs and fewer fixed costs |
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Definition
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Term
| The degree of operating leverage provides a measure of a company's earnings volatility |
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Definition
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Term
| Variable costing is the approach used for external reporting under generally accepted accounting principles |
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Definition
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