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  1. The activity that causes changes in the behavior of costs.
    Activity index
  2. The level of activity at which total revenues equal total costs.
    Break-even point
  3. The amount of revenue remaining after deducting variable costs.
    Contribution margin
  4. The amount of revenue remaining per unit after deducting variable costs; calculating as unit selling price minus unit variable cost.
    Contribution margin per unit
  5. The percentage of each dollar of sales that is available to apply to fixed costs and contribute to net income; calculated as contribution margin per unit divided by unit selling price.
    Contribution margin ratio
  6. The study of how specific costs respond to changes in the level of business activity.
    Cost behavior analysis
  7. The study of the effects of changes in costs and volume on a company's profits.
    Cost-volume-profit (CVP) analysis
  8. A graph showing the relationship between costs, volume, and profits.
    Cost-volume-profit (CVP) graph
  9. A statement for internal use that classifies costs as fixed or variable and reports contribution margin in the body of the statement.
    Cost-volume-profit (CVP) income statement
  10. Costs that remain the same in total regardless of changes in the activity level.
    Fixed costs
  11. A mathematical method that uses the total costs incurred at the high and low levels of activity to classify mixed costs into fixed and variable components.
    High-low method
  12. The difference between actual or expected sales and sales at the break-even point.
    Margin of safety
  13. Costs that contain both a variable and a fixed cost element and change in total but not proportionately with changes in the activity level.
    Mixed costs
  14. The range of the activity index over which the company expects to operate during th eyear.
    Relevant range
  15. The income objective set by management.
    Target net income
  16. Costs that vary in total directly and proportionately with changes in the activity level.
    Variable costs
  17. A costing approach inwhich all manufacturing costs are charged to the product.
    Absorption costing
  18. The relative proportion of fixed versus variable costs that a company incurs.
    Cost structure
  19. A measure of the extent to which a company's net income reacts to a change in sales. It is calculated by dividing contribution margin by net income.
    Degree of operationg leverage
  20. The extent to which a company's net income reacts to a change in sales. Operating leverage is determined by a company's relative use of fixed versus variable costs.
    Operating leverage
  21. The relative percentage in which a company sells its multiple products.
    Sales mix
  22. A specific approach used to identify and manage constraints in order to achieve the company's goals.
    Theory of constraints in order to achieve the company's goals.
  23. A costing approach in which only variable manufacturing costs are product costs, and fixed manufacturing costs are period costs (expenses).
    Variable costing
  24. A formal written statement of management's plans for a specified future time period, expressed in financial terms.
  25. A group responsible for coordinating the preparation of the budget.
    Budget committee
  26. The amount by which a manager intentionally underestimates budgeted revenues or overestimates budgeted expenses in order to make it easier to achieve budgetary goals.
    Budgetary slack
  27. A projection of financial position at the end of the budget period.
    Budgeted balance sheet
  28. An estimate of the expected profitability of operations for the budge period.
    Budgeted income statement
  29. A projection of anticipated cash flows.
    Cah budget
  30. A projection of the quanity and cost of direct materials to be purchased.
    Direct materials budget
  31. Indicidual budgets that focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.
    Financial budgets
  32. A formalized process of selecting strategies to achieve long-term goals and developing policies and plans to implement the strategies.
    Long-range planning
  33. An estimate of expected manufacturing overhead costs for the budget period.
    Manufacturing overhead budget period
  34. A set of interrelated budgets that constitutes a plan of action for a specific time period.
    Master budget
  35. The estimated cost of goods to be purchased by a merchandiser to meet expected sales.
    Merchandise purchases budget
  36. Individual budgets that result in a budgeted income statement.
    Operating budgets
  37. A budgetary approach that starts with input from lower-level managers and works upward so that managers at all levels participate.
    Participative budgeting
  38. A projection of the units that must be produced to meet anticipated sales.
    Production budget
  39. An estimate of expected sales revenue for the budget period.
    Sales budget
  40. The projection of potential sales for the industry and the company's expected share of such sales.
    Sales forecast
  41. A projection of anticipated selling and administrative expenses fo rthe budget period.
    Selling and administrative expense budge
  42. Determines the profitability of a capital expenditure by dividing expected annual net income by the average investment.
    Annual rate of return technique
  43. The process of making capital expenditure decisions in business.
    Capital budgeting
  44. Identifies the time period required to recover the cost of a capital investment from the net annual cash flow produced by the investment.
    Cash payback technique
  45. The rate of return that management expects to pay on all borrowed and equity funds.
    Cost of capital
  46. Considers both the estimated total net cash flows form the investment and the time value of money.
    Discounted cash flow technique
  47. The process of identifying the financial data that change under alternative courses of action.
    Incremental analysis
  48. The rate that will cause the present value of the proposed capital expenditure to equal the present value of the expected net annual cash flows.
    Internal rate of return (IRR)
  49. Find the interest yield of the potential investment.
    Internal rate of return method
  50. The difference that results when the original capital outlay is subtracted form the discounted net cash flows.
    Net present value (NPV)
  51. Discounts net cash flows to their present value and then compares that present value to the capital outlay required by the investment.
    Net present value method
  52. The potential benefit that may be obtained form following an alternative course of action.
    Opportunity cost
  53. A cost that cannot be changed by any present or future decision.
    Sunk cost
Card Set:
2012-03-21 02:11:24
Acounting Test

Accounting test terms
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