Chapter 16 Key Terms

Monica Holloway
Flashcards by Monica Holloway, updated more than 1 year ago
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Chapter 16 Cost Accounting Key Terms Flashcards

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Question Answer
Appropriation a budgeted maximum allowable expenditure
Coefficient of Determination a measure of dispersion that indicates the “goodness of fit” of the actual observations to the least squares regression line; indicates what proportion of the total variation in y (the dependent variable) is explained by the regression model
Committed Cost a cost related to either the long-term investment in plant and equipment of a business or the organizational personnel who are deemed essential by top management; cannot be changed without long-run detriment to the organization
Cost Avoidance the practice of finding acceptable alternatives to high-cost items and/or not spending money for unnecessary goods or services
Cost Consciousness a company-wide attitude about the topics of cost understanding, cost containment, cost avoidance, and cost reduction
Cost Containment the practice of minimizing, to the extent possible, period-by-period increases in per-unit variable and total fixed costs
Cost Control System a logical structure of formal and/or informal activities designed to analyze and evaluate how well expenditures are managed during a period
Cost Reduction the practice of lowering current costs, especially those that may be in excess of what is necessary
Discretionary Cost a cost that is periodically reviewed by a decision maker in a process of determining whether it continues to be in accord with ongoing policies; arises from a management decision to fund an activity at a specified cost amount for a specified period of time, generally one year; can be reduced to zero in the short run if necessity so dictates
Electronic Data Interchange System (EDI) a system that allows for electronic data transmission between organizations; commonly used in the process of e-procurement
Engineered Cost a cost that has been found to bear an observable and known relationship to a quantifiable activity base
E-Procurement System an electronic B2B (business-to-business) buy-side application controlling the requisitioning, ordering, and payment functions for inputs
Forward Contract an agreement that gives the holder the right to purchase a given quantity of a specific item (e.g., stock) at a specific price (Also an Option)
Hedging using options and forward contracts to manage price risk
Option an agreement that gives the holder the right to purchase a given quantity of a specific item (e.g., stock) at a specific price
Price Elasticity a numerical measure of the relationship of supply or demand to price changes
Random the concept that some portion of a cost is not predictable based on the cost driver or the cost is stochastically, rather than deterministically, related to the cost driver
Spend Analysis The generation of answers to these types of questions: Are the costs under consideration fixed or variable, product or period? What are the drivers of those costs? From whom were purchases made? When were purchases made? Understand the type of costs incurred by an organization.
Uncertainty the doubt or lack of precision in specifying future outcomes
Working Capital the amount remaining after total current liabilities are subtracted from total current assets; measures the amount of an organization's liquid assets; may also be referred to as “net working capital”
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