Cost Basics
This type of cost can be directly tied to a product or salesperson
What is a Direct Cost
This costing method includes all costs, both direct and indirect
What is full costing
True or False: More sales always means more profit
What is false
This type of cost is shared and does not go away if one product is removed
What is a indirect cost
This method only includes costs directly tied to the segment
What is contribution margin
This formula has the abbreviation, ROAM
What is return on assets managed
True or False: A cost can change from direct to indirect depending on what you are measuring
What is True
This costing method assigns costs based on activities like sales calls or service
What is activity based costing
This ratio multiplied by Contribution % equals ROAM
What is asset turnover
This determines whether a cost is classified as direct or indirect
What is the object of measurement
This is the contribution margin approach usually better for decision-making
What is because it only includes costs directly tied to the segment and avoids arbitrary allocation of indirect costs
Name one way a company can improve ROAM
What is
Increase profit margin OR
Increase asset turnover