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47 Cards in this Set
- Front
- Back
- 3rd side (hint)
Product Cost Equation
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product cost = direct materials + direct labor + MO
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period cost equation
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Period cost = selling exp + admin exp
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Conversion cost equation
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conversion cost = direct labor + MO
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Prime Cost Equation
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Prime cost = direct materials + direct labor
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what does each stand for
Y = a + bx |
Y = total mixed cost
a = (intercept) total fixed cost b = (slope) variable cost per unit of activity x = activity level |
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High Low Method equations used
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variable cost = change in cost / change in activity
y2 = a(fixed cost) + b(variable cost)x2 |
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fixed cost equation
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Fixed cost = Total cost - (variable cost x activity level)
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cost of goods sold equation
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Cost of goods sold = beg. inventory + purchases - ending inventory
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CM equation
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CM = total sales - variable exp
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unit CM euqation
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Unit CM = selling price per unit - variable exp per unit
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CM Ratio equation
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CM ratio = CM / sales
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How to find change in CM
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Change in CM = CM ratio x change in sales
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How to get M pursuing the variable exp ratio
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CM = 1 - variable exp ratio
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How do you find sales?
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sales = selling price per unit x quantity sold
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How do you figure out variable exp?
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variable exp = variable exp per unit x Quantity sold
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How to find the break even point in sales?
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Profit = Unit CM x Q - Fixed exp
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How do you find break even point in dollar sales?
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Profit = CM ratio x sales - Fixed exp
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Margin of safety in dollars
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margin of safety in $ =Total sales - Breakeven sales
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Margin of safety in percentage
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Margin of safety in % = margin of safety $ / total sales
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How do you get the Degree of Operating Leverage?
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Degree of operating leverage = CM / net operating income
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How do you figure out the percentage change in net operating income?
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% change in NOI = Degree of operating leverage x % change in sales
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How do you get the variable exp ratio
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variable exp ratio = variable exp / sales
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How do you get the variable exp
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variable exp = sales x variable %
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how do you find the operating net income or profit?
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profit = CM - fixed exp
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Cost Object
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Anything for which cost data are derived (ex- products, customers, jobs, etc.)
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Direct Cost
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A cost that can only be easily and conveniently traced to a specific cost object.
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Indirect Cost
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A cost that cannot be easily and conveniently traced to a specified cost object.
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A cost that is incurred to support a number of cost objects but cannot be traced to them individually.
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Common cost
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Raw Materials
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Any materials that go into the final product
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Materials that become an integral part of a finished product and whose costs can be conveniently traced to it.
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Direct Materials
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Small items of material such as glue and nails
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Indirect materials
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Factory labor costs that can be easily traced to individual units of product.
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Direct Labor
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labor costs of janitors, supervisors, material handlers, and other factory workers.
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indirect cost
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cannot be easily traced to particular products
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Manufacturering Overhead
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All manufacturing coats except direct materials and direct labor.
(ex- used to operate the factory! heat and lights, property tax, depreciation, maintenance, etc) |
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All cost that are incurred to secure customer orders and get the finished product to the customer.
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selling costs
(ex- advertising, shipping, sales travel, sales commission, sales salaries, and cost of finished goods warehouse) |
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all costs associated with the general management of an organization rather than with manufacturing or selling
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Administerive costs
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product costs
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all costs involved in acquiring or making a product
(direct materials, direct labor, and MO |
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All costs that are not product costs
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period costs
(selling and admin costs) |
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Cost Behavior
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the way in which a cost reacts to changes in the level of activity
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Cost structure
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The relative proportion of each type of cost in an organization
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A cost that varies, in total, in direct proportion to changes in the level of activity.
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Variable Cost
Stays constant per unit! |
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Cost drivers (activity base)
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A measurement of whatever cause the incurrence of a variable cost
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A cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. (insurance, property tax, rent, supervisory salary, admin salary, and advertising)
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Fixed Cost
If a fixed cost is expressed on a per unit bases, it varies inversely with the level of activity |
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Mixed Cost
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a cost that contains both variable and fixed elements
Find by taking exp/ sales in units... if it stays the same = mixed |
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opportunity cost
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the potential benefit that is given up when one alternative is selected over another
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cost that has already been incurred and that cannot be changed by any decision made now or in the future
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Sunk Cost
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break-even point
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the level of sales at which profit is zero
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