cost behavior - describes how costs change as volume changes
variable costs - costs that change in total in direct proportion to changes in
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cost equation - a mathematical equation for a straight line that expresses how a cost behaves
variable cost per unit of activity times volume of activity, y equals v times x - total variable cost
fixed costs - costs that stay constant in total despite wide changes in volume
committed fixed costs - fixed costs that are locked in because of previous management decisions; management has little or no control over these costs in the short run
discretionary fixed costs - fixed costs that are the result of annual management decisions; fixed costs that are controllable in the short run
mixed costs - costs that change, but not in direct proportion to changes in volume. Mixed costs have both variable and fixed costs components
relevant range - the band of volume where total fixed costs remain constant at a certain level and where the variable cost per unit remains constant at a certain level
step costs - a cost behavior that is fixed over a small range of activity and then jumps to a different fixed level with moderate changes in volume
curvilinear costs - a cost behavior that is not linear
account analysis - a method for determining cost behavior that is based on a manager's judgment in classifying each general ledger account as a variable, fixed, or mixed cost
scatter plot - a graph that plots historical cost and volume datah
outliers - abnormal data points; data points that do not fall in the same general pattern as the other data points
high low method - a method for determining cost behavior that is based on two historical data points: the highest and lowest volume of activity
regression analysis - a statistical procedure for determining the line that best fits the data by using all of the historical data points, not just the high and low data points
absorption costing - the costing method where products absorb both fixed and variable manufacturing costs
variable costing or direct costing - the costing method that assigns only variable manufacturing costs to products. All fixed manufacturing costs - fixed moh - are expensed as period costs
contribution margin income statement - income statement that organizes costs by behavior - variable costs or fixed costs - rather than by function
sales revenue minus variable expenses - contribution margin
change in inventory level, in unit times fixed moh per unit - difference in operating income
cost volume profit analysis - expresses the relationship among costs, volume, and profit or loss
sales mix - the combination of products that make up total sales
contribution margin income statement - income statement that organizes costs by behavior, variable costs or fixed costs, rather than by function
contribution margin - sales revenues minus variable expenses
contribution margin per unit or unit contribution margin - the excess of the unit sales price over the variable cost per unit
contribution margin ratio - ratio of contribution margin to sales revenue
the percentage of each sales dollar that is available for covering fixed expenses and generating a profit - definition contribution margin ratio
breakeven point - the sales level at which operating income is zero, total revenues equals total expenses
sales minus variable minus fixed equals operating income - the income statement approach
fixed plus operating income divided by contribution margin per unit equals sales in units - the shortcut approach using the unit contribution margin
fixed plus operating income divided by contribution margin ratio equals sales in dollars - the shortcut approach using the contribution margin ratio
sensitivity analysis - a what-if technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes
margin of safety - the excess of actual or expected sales over break-even sales, or the drop in sales a company can absorb without incurring an operating loss
operating leverage - the relative amount of fixed and variable costs that make up a firm's total costs
operating leverage factor - at a given level of sales, the contribution margin divided by operating income. The operating leverage factor indicates the percentage change in operating income that will occur from a 1% change in sales volume
indifference point - the volume of sales at which a company would be indifferent between alternative cost structures because they [Show Less]