Key Concepts from Units 6 and 7 in Managerial Accounting

These flashcards cover key concepts from units 6 and 7 in managerial accounting, focusing on cost categories, behaviors, and analyses important for understanding managerial accounting principles.

Product Cost

Manufacturing costs including direct materials, direct labor, and manufacturing overhead.

Period Cost

Non-manufacturing costs, primarily selling and administrative expenses.

Fixed Cost

Costs that remain constant in total regardless of the number of units produced.

Variable Cost

Costs that remain constant per unit but vary in total with the number of units produced.

Cost Volume Profit (CVP) Analysis

Calculates profit using the formula: Sales Revenue - Variable Costs - Fixed Costs.

Contribution Margin

Sales revenue minus variable costs; represents the amount available to cover fixed costs.

Breakeven Point

The level of sales at which total revenue equals total costs, resulting in zero profit.

Direct Cost

Costs that can be directly traced to a specific product or service.

Indirect Cost

Costs that cannot be directly traced to one specific product or service.

Estimated Manufacturing Overhead

Projected overhead costs for the upcoming period, used for budgeting.

Actual Manufacturing Overhead

Real overhead costs incurred during a specific period.

Applied Manufacturing Overhead

Manufacturing overhead assigned to products using a predetermined overhead rate.

Job Order Costing

A costing method used for distinct, individual items or jobs.

Process Costing

A costing method used for mass production of identical items.

Activity-Based Costing (ABC)

An overhead allocation method that uses multiple cost drivers for more accurate cost allocation.

Cost Driver

A numerical measure that indicates the relationship between costs and activities.

Cost Pool

A collection of costs associated with a specific activity or set of activities.

Contribution Margin Ratio

The contribution margin expressed as a percentage of total sales.