Cost terms
Manufacturing costs that cannot be easily traced directly to specific units produced
What is manufacturing overhead?
Typically used by companies that produce large quantities of identical units
What is process costing?
Sales revenue less variable expenses
What is contribution margin?
A budget that starts from zero
What is zero-based budgeting?
A shared costs between multiple business segments
What is common fixed costs?
Costs incurred by manufacturers to produce their products
What are product costs?
Total estimated manufacturing overhead / Total estimated allocation base
What is the predetermined manufacturing overhead rate?
Point at which operating income is zero
What is the breakeven point?
Author of the book Budgetary Control
What is James McKinsey?
Operating income over net operating assets
What is ROI?
A cost that differs between alternatives
What is relevant cost?
Predetermined MOH rate × Actual amount of allocation base used
What is applied MOH?
The relative proportion of fixed and variable costs in an organization
What is cost structure?
AQ x (AP - SP)
What is price variance?
ROI = margin x turnover
What is the DuPont model?
A cost that remains constant, in total, regardless of changes in the level of the activity
What is fixed cost?
Used to keep track of all of the costs of a job
What is a job cost sheet?
A measure of how sensitive net operating income is to percentage changes in sales
What is operating leverage?
Planning; Allocating resources; and Benchmarking (or controlling cost)
What are the purposes of budgeting?
Its managers are responsible for both revenues and costs (but not division assets)
What is a profit center?
The benefit that is foregone as a result of pursuing some course of action
What is opportunity cost?
A system that breaks the total overhead down into multiple cost activities and use multiple overhead cost drivers.
What is Activity Based costing?
Breakeven point if FC = $1,000; Sales price per unit = $500; VC per unit = $300
What is 5?
This company would like to have ending inventory to be equal to 20% of the following month’s budgeted sales in units. Budgeted sales is 20 units in April and 50 units in May. How many units to produce in April?
What is 26?
Residual income for a division with average operating assets of $1,000,000, net operating income of $335,000 and a minimum required rate of return of 20%.
What is $135,000?