Activity-based pricing - - Established a base price for a proposed customer order based on the estimated cost of producing and delivering the order.
-Administered transfer price - - A transfer price set by some authority in the organization to price the exchange of a good or service between two...
Accounting for Management Decision Making
Activity-based pricing - - Established a base price for a proposed customer order based on the estimated
cost of producing and delivering the order.
-Administered transfer price - - A transfer price set by some authority in the organization to price the
exchange of a good or service between two organization units. For example, the general manager of a
car dealership may set the price that the Service Department will bill other organization departments at
75% of the rate changed to external customers.
-Applied indirect costs - - Indirect costs, such as the costs of capacity related resources, that are applied
to a cost object.
-Appraisal costs - - The costs related to inspecting materials or products to ensure that they meet both
internal and external customer requirements.
-Appropriations - - Planned and approved cash outflows, or spending plans, in government agencies.
-Authoritative budgeting - - A budgeting process that occurs when a superior informs subordinates what
their budget will be without requesting input.
-Avoidable costs - - The costs that can be eliminated when a part, product, product line, or business
segment is discontinued.
-Balanced Scorecard - - A strategic management system that translates an organization's strategy into
clear objectives, measures, targets, and initiatives organized by four perspectives.
-Bench-marking - - The process of studying and adapting the best practices of other organizations to
improve the firm's own performance and establish a point of reference by which internal performance
can be measured.
-Bench-marking (performance) gap - - The gap between actual performance and the performance level
of the organization that established the benchmark level of performance.
-Breakeven point - - The level of sales units or sales dollars at which the contribution from sales revenue
less variable costs covers fixed costs. At the breakeven point, net income equals zero.
-Budget - - A quantitative expression of the money inflows and outflows that reveal whether the current
operating plan will meet the organization's financial objectives.
-Budgeting process - - The approach used to determine how to allocate financial resources to each part
of an organization based on the planned activities and short-run objectives of that part of the
organization.
-Capacity cost rate - - The cost of supplying capacity for each group of similar resources, such as people
and equipment; calculated by dividing the total cost of supplying the resources by their practical
capacity, typically measured by the time available to perform productive work.
, -Capacity-related costs - - The costs associated with capacity-related resources.
-Capacity-related resources - - Resources that are acquired and paid for in advance of when the work is
done. Capacity-related resources provide the organization with the capacity to make or deliver goods
and services.
-Cash bonus - - A payment method that pays cash based on some measured performance. Also called
lump-sum reward, pay for performance, or merit pay.
-Certified supplies - - A set of suppliers that are certified by a company because they are dependable
and consistent in supplying high -quality items as needed.
-Consultative budgeting - - A method of budget setting that occurs when managers ask subordinates to
discuss their ideas about the budge but no joint decision making occurs.
-Consumable resources - - A resource that is consumed as a result of some activity. Examples of
consumable resources are wood used to make furniture and the time of an hourly paid worker who
makes the furniture.
-Continuous budget - - A budget that is continuously updated as the current period is dropped from the
budget and a new period is added.
-Contribution margin - - Sales less variable costs.
-Contribution margin per unit - - The contribution margin per unit of consumption of a constraining
factor of production. For example, the contribution per machine hour.
-Contribution margin ratio - - The ratio of a product's contribution margin to its selling price. It is the
fraction of each sales dollar that contributes to covering fixed cost and providing a profit.
-Controllability principle - - States that the manger of a responsibility center should be assigned
responsibility only for the revenues, costs, or investments controlled by responsibility center personnel.
-Conversion costs - - Costs of labor and support activities to convert the materials or product at each
process stage.
-Cooperative bench-marking - - The voluntary sharing of information through mutual agreements.
-Cost-based transfer prices - - A cost-based transfer price occurs when the price of a good or service
exchanged between two organization units is based on the costs incurred by the supplying (selling)
organization unit. Cost based transfer prices reflect decisions about which elements of the product or
services' cost should be included, such as fixed plus variable or just variable costs, standard or actual
costs, and any mark-up over the transferred costs. For example, one cost-based transfer price might be
standard variable cost plus a mark up of 34%.
-Cost centers - - Responsibility centers in which employees control costs but do not control revenues or
investment levels.
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