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Account analysis |
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a metiod for analyzing cost behavior in which an account is classified as wither VC or FC based on the analyst's prior knowledge of how the cost in the account behaves |
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activity base |
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a measure of whatever causes the incurrence of a VC. |
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committed fixed costs |
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investments in facilities, equipment, and basic organizational structure that can't be significantly reduced even for short periods of time without making fundamental changes |
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contribution approach |
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an income statement format that organizes costs by their behavior. costs are separated into VC and FC categories rather than being separated according to organizational functions. |
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contribution margin |
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the amount remaining from sales revenues after all variable expenses have been deducted |
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cost structure |
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the relative proportion of fixed, variable, and mixed costs in an organization |
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dependent variable |
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a variable that responds to some casual factor; total cost is the dependent variable, as represented by the letter Y: Y=a+bX |
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discretionary fixed costs |
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those FC that arise from annual decisions by management to spend on certain FC items, such as advertising and research |
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engineering approach |
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a detailed analysis of cost behavior based on an industrial engineer's evaluation of the inputs that are required to carry out a particular activity and of the prices of those inputs |
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high-low method |
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a method of separating a mixed cost into its FC and VC elements by analyzing the change in cost between the high and low activity levels |
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independent variable |
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a variable that acts as a casual factor; activity is the independent variable as represented by the letter X: Y=a+bX |
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least-squares regression method |
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a method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors |
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linear cost behavior |
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cost behavior is said to be linear whenever a straight line is a reasonable approximation for the relation between cost and activity. |
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mixed cost |
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a cost that contains both VC and FC elements |
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Multiple regression |
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an analytical method required when variations in a dependent variabble are caused by more than one factor |
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R2 (R squared) |
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a measure of goodness of fit in least-squares regression analysis. it is the percentage of the variation in the dependent variable that is explained by variation in the independent variable |
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relevant range |
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the range of activity within which assumptions about VC and FC behavior are reasonably valid |
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step-variable cost |
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the cost of a resource that is obtained in large chunks and that increases and decreases only in response to fairly wide changes in activity. |
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