Term
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Definition
| is the communicating link between accural based income statement and the cash reported on the balance sheet. |
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Term
| Do high sales and profits translate into more cash? |
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Definition
| statement of cash flows- usually cash flows from operating activites must be the main source of cash for long-term success. |
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Term
| If sales and profits are low, how is the company generating cash? |
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Definition
| if investing activites are generating cash, the business may be in trouble because it is selling off its long term assets. If financing activities are generating cash, investors will demand cash flow from O.A. |
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Term
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Definition
| current year-prior year balance then dollar change/prioryear balance |
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Term
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Definition
| shows the relationship of each item to a base amount on financial statements. |
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Term
| What does the vertical analysis state in income statement? |
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Definition
| each item expressed as a percentage of net sales |
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Term
| what does teh vertical analysis state in balance sheet? |
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Definition
| each item expressed as percentage of total assets. |
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Term
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Definition
| comparing a company with another lading company |
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Term
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Definition
| ability to pay current liabilities, sell inventory and collect receivables, long term debt, measure profitability, analyzing stock as an investment |
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Term
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Definition
| current assets/current liabilites |
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Term
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Definition
| cash+short term investments+net current receivables/current liabilites |
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Term
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Definition
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Term
| ACCOUNT RECEIVABLE TURNOVER |
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Definition
| measures ability to collect cash from credit customers. |
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Term
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Definition
| current assets-current liabilities |
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Term
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Definition
| MEASURES # OF TIMES A COMPANY SELLS inventory during a year |
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Term
| Days' sales in receivables |
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Definition
| also measures ability to collect receivables. netsales/365=avg day's sales. Then avg net account receivables/avg days' sales |
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Term
| account receivable turnover |
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Definition
| net sales/avg account receivable |
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Term
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Definition
| % ofeach sales dollar earned as net income. |
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Term
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Definition
| measures success in using assets to earn a profit. |
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Term
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Definition
| measures success using assets to earn a profit. |
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Term
| return on common stockholders' equity |
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Definition
| how much income isearned for dollar invested by common shareholders. |
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Term
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Definition
| net income earned for each share of common (net income-preferrred dividends/# of common shares outstanding) |
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Term
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Definition
| net income-preferred dividends/avg common equit |
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Term
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Definition
| company borrows at a lower rate than invests the money to earn a higher rate |
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Term
| return on equity is greater than |
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Definition
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Term
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Definition
| market price pershare/earnings per share |
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Term
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Definition
| div per share-market price per share |
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Term
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Definition
| common equity/common shares outstanding |
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Term
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Definition
| shows proportion of asset financed with debt, the higher the ratio the higher the risk (total liabilities/total assets) |
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Term
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Definition
| measures the # of times income can cover interest expense, high ratio indicates ease in paying interest (operating income/int expense) |
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Term
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Definition
| for external reporting, provides financial stements for external stakeholders |
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Term
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Definition
| internal planning and control, provides info to help managers as they lead the business. |
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Term
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Definition
| beg inv+purchases, net+freight in-ending inv=COGS |
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Term
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Definition
| part of inventory, expensed when sold |
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Term
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Definition
| not part of inventory, expensed when incurred |
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Term
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Definition
| beg work in process+ direct materials+direct labor+manufacuring overhead-ending work in process |
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Term
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Definition
| beg inv+ purchases freight in=direc materials av for use-ending inventory=direct materials |
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Term
| work in process inventory |
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Definition
| beg inv+direct materials used+direct labor+man overhead-ending inv=cogs manUFACTURED |
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Term
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Definition
| GATHER INFO TO DETERMINE THE PRODUCTION COST PER UNIT. Helps managers set selling price so profit can be earned, compute COGS, compute cost of inventory |
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Term
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Definition
| mat inventor--> wip--->man overhead |
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Term
| predetermined man overhead rate |
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Definition
| total estimated man overhead costs/total estimated quality of the manoverhead allocation rate |
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Term
| examples of measuring work done |
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Definition
| direct labor hours, direct labor cost, machine hours |
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Term
| allocate overhead costs to jobs |
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Definition
| allocated manufacturing overhad cost=predetermined overhead application rate*actual quantity of allocation base used on the job |
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Term
| hourly direct labor costs |
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Definition
| direct labor costs/direc labor hours |
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Term
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Definition
| employee's annual salary/work hrs per yr |
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Term
| predetermined indirect allocation cost rate |
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Definition
| expected indirect costs/expected direct labor costs |
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Term
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Definition
| hourly direct labor costs+predetermined indirect cosst allocation rate |
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Term
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Definition
| used by companies who manufacture large quantities of similar products. Ex. conversion costs, direct and manufacturing overhead, costs incurred o convert materials into finishedproducts |
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Term
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Definition
| materials inv goes to job 3, man wages job 1, man overhead job 1 all of this goes to --->finished goods --->cogs.Accumulates costs for each batch or job. Accounting firms, music studios, health care providers, building contractors and furniture manufacters are examples. |
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Term
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Definition
| summarize the flow of physical units, compute output in equivalent units, compute the cost per equivalent unit, assign coss to completed and ending inventory units |
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Term
| predetermined manufacuring overhead rate |
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Definition
| total estimated manufacturing overhead costs/totalestimated quantity of themanufacturing overhead allocation base |
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Term
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Definition
| refines the way indirect costs are allocated to production, focuses on costs incurred bye ach production activity, each activity has its own cost driver |
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Term
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Definition
| identify each acivity and estimate its total indirect cost, identify the cost driver for each activity andestimate the quantity of each driver, compute the cost allocation for each activity, allocate indirec costs to the cost obj |
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Term
| ACTIVITY BASED MANAGEMENT |
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Definition
| uses abc to make decisions that increase profits while meeting customer needs. |
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Term
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Definition
| reevaluating activites to reduce costs, requires cross-functional teams, setting sales based on target prices |
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Term
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Definition
| shows the percentage of each sales dollar earned as net income. |
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Term
| rate of return on total assets |
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Definition
| measures a company's success in using assets to earn a profit. |
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Term
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Definition
| earing more income on borrowed money than the related interest expense, thereby increasing the earnings for the owners of the business. |
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Term
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Definition
| ratio of the market price of a share of common stock to the company's earnings per share. It shows the market price of $1 of earnings, this ratio, abbreviaed P/E, appears in the Wall Street Journal stock listings. |
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Term
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Definition
| the ratio of dividends per share t the stock's market price per share. It measures the % of a stock market's value that is returned annually as dividends. |
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Term
| book value per share of common stock |
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Definition
| is common equity divided by # of common shares outstanding. Common equity equals total stockholders' equity less preferred equity. |
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Term
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Definition
| provides info to help managers plan and control operations as they lead the business. This includes managing the company's plant, equipment and HR. |
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Term
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Definition
| weighing the costs against benefits. |
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Term
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Definition
| inventory held too long becomes obsolete.Storing goods takes space and must be insured. tHIS TYPE OF PHILOSOPHY helps managers cut costs by speeding the transformation of raw materials into finished products. |
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Term
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Definition
| companies use the inernet in everyday operations of selling and customer service. |
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Term
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Definition
| use labor, equipment, supplies and facilities to convert raw materials into finished products. |
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Term
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Definition
| includes raw materials used in making a product.Ex. a baker's raw materials include flour, sugar and eggs. Materials to manufacture a DVD include casings, colored insert label, blank dvd and software program. |
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Term
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Definition
| includes goods that are in the manufacturing process but not yet complete. Ex. dough ready for cooking. |
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Term
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Definition
| includes completed goods that have not yet been sold. |
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Term
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Definition
| is a cost that can be direcly traced to a cost object, such asa product. Ex. Direct materials and direct labor. |
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Term
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Definition
| is anything for which managers want a separate measurement of cost. |
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Term
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Definition
| costs that cannot betraced direcly to a cost object, such as manufacturing overhead. |
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Term
| What's included in man overhead? |
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Definition
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Term
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Definition
| includes pay of forklift operators, janitors, and plant managers. |
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Term
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Definition
| resell tangible products purchased ready made from suppliers, have only one category of inventory |
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Term
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Definition
| use labor, plant and equipment to transform raw materials into new finishedproducts have threee categories of inventor: materials inv, WIP inv, and finished goods inventry |
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Term
| When should we use job costing? |
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Definition
| We use job costing when the company produces uniqe products (DVDS) in small batches. |
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Term
| When should we use process costing? |
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Definition
| when the company produces identical products in large batches, often in a continuous flow. |
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Term
| how should we record use of materials? |
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Definition
| DR-WIP MAN OVERHEAD. CR- MATERIALS INV |
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Term
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Definition
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Term
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Definition
| MAN OVER HEAD-DR, WAGES PAYABLE-CR |
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Term
| ASSIGNMENT OF LABOR COSTS OF JOB |
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Definition
| DR WIP, MAN OVERHEAD; CR- MAN WAGES |
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Term
| WHAT DECISIONS CAN ABC DO? |
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Definition
| PRICING AND PRODUCT MIX, COST CUTTING |
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Term
| HOW DOES ABC HELP BUSINESSES? |
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Definition
| THEY HELP SET THE SELLING PRICES OF THEIR PRODUCTS. The selling price must cover all costs-both manufacturing costs and operating expenses-plus provide a profit. |
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Term
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Definition
| means reevaluating activites to reduce costs.It requires the following functional teams: marketers to identify customer needs, engineers to design more efficient products, accountants to estimate costs |
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Term
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Definition
| starts with the price that customers are willing to pay and hen subtracts the company's desired profit |
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Term
| how to achieve target costs |
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Definition
| use value engineering to cut costs by improving product design and production processes. |
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Term
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Definition
| MORE ACCURATE PRODUCT COST INFO, MORE DETAILED INFO ON THE COSTS OF ACTIVITES AND THEIR COST DRIVERS HELPS MANAGERS CONTROL COSTS. |
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Term
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Definition
| with output that has been completed and then assigns manufacturing costs to units sold and to inventories. |
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Term
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Definition
| are costs to avoid poor quality goods or services |
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Term
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Definition
| are costs spent to detect poor quality goods or services. |
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Term
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Definition
| are costs spent to avoid poor quality goods or services before delivery to customers. |
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Term
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Definition
| are costs spent after the company delivers poor quality goods or services o customers and hen has to make hings right with the customer. |
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Term
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Definition
| prevention, apprasial, internal and external failure |
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Term
| how to manage the four types of quality costs? |
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Definition
| invest up front in prevention and apprasial to reduce internal and exernal failure costs. |
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Term
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Definition
| change in direct proportion to changes in the volume of activity. Those activites include selling, producing, driving and calling. |
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Term
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Definition
| costs that increase or decrease in total as the volume. |
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Term
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Definition
| are costs that don't change over wide ranges of volume. Exs include depreciation on cars, as well as the DJ'S SALARIES. |
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Term
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Definition
| changes depending on the # of events. |
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Term
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Definition
| costs that have variable and fixedcomponents. Ex. cell compnay charges $1/month to provide service and .15 for each minute of use. So 25(10/(100*.15) |
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Term
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Definition
| is the band of volume where total fixed costts remain constant and the variable cost per unit remains constant. |
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Term
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Definition
| is sales rev-variable costs. Theexcess of sales rev over variable costs contributes to covering fixedcosts and then to providing operating income. |
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Term
| contribution margin income statement |
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Definition
| shows costs by cost vehavior variable costs and fixed csts and highlights the contribution margin. |
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Term
| contribution margin ratio |
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Definition
| ratio of contribution to sales revenue. |
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Term
| how do changes in vol of activity affect total costs? |
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Definition
| total variable costs change in proprotion to changes in vol # of products or servics sold, total fixed costs no change. |
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