BUS 371 - Chapter 3 Terms

Ms. Cassie Weitzenkamp, CPA, MPA
Flashcards by Ms. Cassie Weitzenkamp, CPA, MPA, updated more than 1 year ago
Ms. Cassie Weitzenkamp, CPA, MPA
Created by Ms. Cassie Weitzenkamp, CPA, MPA almost 6 years ago
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BUS 371 - Chapter 3 Terms

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Applied Overhead The dollar amount of overhead assigned to Work in Process inventory using the activity measure that was selected to develop the overhead rate
Under-applied overhead Occurs when the overhead applied to Work in Process inventory is less than the actual overhead cost
Over-applied overhead Occurs when the overhead applied to Work in Process inventory is more than actual overhead cost
Theoretical Capacity The estimated maximum potential activity for a specified time
Practical Capacity Reducing theoretical capacity by ongoing, regular operating interruptions (such as holidays, downtime, and start-up time)
Normal Capacity Consideration of historical and estimated future production levels and the cyclical fluctuations
Expected Capacity A short-run concept that represents the firm's anticipated activity level for the coming period based on projected product demand
High-low Method Analyzes a mixed cost by first selecting the highest and lowest levels of activity in a data set if these two points are within the relevant range
Outliers Non-representative or abnormal observations
Flexible budget A planning document that presents expected variable and fixed costs at different activity levels
Absorption Costing/ Full Costing Treats the costs of all manufacturing components (direct material, direct labor, variable overhead, and fixed overhead) as inventoriable, or product, costs in accordance with GAAP
Functional Classification A group of costs that were incurred for the same principal purpose
Variable Costing/ Direct Costing A cost accumulation method that includes only direct material, direct labor, and variable overhead as product costs
Product Contribution Margin Sales minus variable cost of goods sold
Contribution Margin The difference between total revenues and total variable expenses
Volume Variance Reflects the monetary impact of a difference between the budgeted capacity used to determine the predetermined fixed overhead rate and the actual capacity at which the company opperated
Phantom Profits Temporary absorption costing profits caused by producing more inventory than is sold
Least Squares Regression Analysis A statistical technique that analyzes the relationship between independent (causal) and dependent (effect) variables
Dependent Variable Unknown variable
Independent Variable Known value
Simple Regression Uses one independent variable to predict the dependent variable based on the formula for a straight line: y = a + bX
Multiple Regression Two or more independent variables are used to predict the dependent variable
Regression Line Any line that goes through the means (or averages) of the independent and dependent variables in a set of observations
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