Term
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Definition
| contribution margin less allocated capacity costs |
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Term
| How can we systematically estimate the cost of capacity resources? |
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Definition
| direct estimation and cost allocation |
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Term
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Definition
| systematically examining each cost account to evaluate whether a decision would change a capacity cost |
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Term
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Definition
| calculated by dividing the costs in the cost pool by the denominator value |
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Term
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Definition
| another name for the allocation rate |
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Term
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Definition
| also known as capacity cost |
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Term
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Definition
| term also used to refer to the allocation rate |
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Term
| How do allocations help long term decisions? |
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Definition
| by breaking up capacity cost into pieces attributable to individual products. We can then use the product level estimates to compute expected costs for a new volume of operations or a revised product mix. |
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Term
| The quality of a decision made using allocation depends... |
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Definition
| on how well the allocation estimates the capacity cost associated with the various options |
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Term
| Two methods to improve the accuracy of allocation procedures |
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Definition
1 use multiple cost pools and drivers
2 Exclude some capacity cost |
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Term
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Definition
| firms that use a single rate of allocation is often characterized as using a plantwide rate |
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Term
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Definition
| name for firms that use many different allocation rates |
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Term
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Definition
1 for long run decisions, estimate changes in capacity cost
2 calculate income in accordance with GAAP
3 Influence behavior |
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Term
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Definition
| required by GAAP which separates product costs from period costs, for external reporting purposes |
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Term
| Variable or Direct Costing |
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Definition
| this is the type of costing that splits cost into variable and fixed costs |
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Term
| What is the only difference between absorption and variable costing? |
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Definition
| the way they deal with fixed manufacturing overhead. |
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Term
| Cost allocation can be used to meet goals how? |
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Definition
| They can be used to determine how much cost is allocated during a certain period, effecting overall cost and profit |
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Term
| How can allocation be used to effect behavior? |
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Definition
| It can be used to defer one from using a specific resource or encourage them to use a different one |
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Term
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Definition
| Another term for Absorption Costing |
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