PBHL 603 Chapter 4

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PBHL 603 Chapter 4
2013-10-08 02:01:28

Estimating costs
Show Answers:

  1. What is the primary purpose of managerial accounting information?
    Cost estimation or the measurment of costs
  2. What is meant by the term "cost"?
    A resource use associated with providing or supporting a specific service
  3. What are the two primary ways that costs can be classified?
    1.  Managerial accounting - creating and use of data needed to manage an organisation's current and future operations

    2.  Financial accounting - creation of statements that report what has occurred at the organisation
  4. What is the "relevant range"?
    The range of output (volume) for which the organisation's cost structure holds
  5. What is a fixed cost?
    A cost known with certainty - known and predictable, regardless of volume, within some relevant range. 

    Examples include facilities, diagnostic equipment, and information systems.
  6. What is a variable cost?
    Costs that depend on the volume of services supplied.  Examples include supplies and leased equipment.
  7. How does time period affect the definition of fixed costs?
    Over the long run, facilities needs will change as volume changes.
  8. What is meant by underlying cost structure?
    The relationship between between volume and costs used by managers in planning, control, and decision making.
  9. What are semi-fixed costs?
    Costs that are fixed, but not at a single amount throughout the entire relevant range.  Falls between the two extremes of fixed and variable costs.