Managerial Accounting Key Concepts

These flashcards cover key concepts and terminology in managerial accounting that are essential for understanding module 3.

Contribution Margin Definition

The amount by which a product's selling price exceeds its total variable cost per unit.

Break-Even Point (In Units) Definition

The level of sales at which total revenues equal total costs, leading to no profit or loss.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent.

Variable Costs

Costs that vary directly with the level of production, like raw materials.

Direct Materials

Components used in the production process that can be directly traced to specific products.

Direct Labor

Labor costs that can be directly traced to the production of specific goods.

Manufacturing Overhead

Costs incurred in the production process that cannot be traced directly to specific products.

Cost Driver

An activity that causes costs to be incurred, such as hours worked or machine hours.

Mixed Costs

Costs that have both fixed and variable components, dependent on production levels.

Static Budget

A budget prepared for a single level of output.

Flexible Budget

A budget that adjusts to different volumes of sales or levels of activity.

Variance Analysis

The process of comparing budgeted amounts to actual amounts to assess performance.

Contribution Margin Ratio

Contribution margin expressed as a percentage of total sales.

Job vs. Process Costing

Job costing is used for custom products, while process costing is used for homogeneous products.

Relevant Range

The activity level within which certain cost behaviors are valid.

Target Profit

The desired profit level that includes total costs and is calculated per sale price.

ABC Costing (Activity-Based Costing)

An accounting method that assigns costs to products based on activities involved in producing them.

Period Costs

Costs that are treated as expenses in the period in which they occur.