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fixed vs variable cost
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3.2 Costs & revenues
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Costs are not always easily measured or captured in - financial statement The net benefit of those paths not taken are called - opportunity costs Are opportunity cost recorded? – no Sunking cost- Do not impact today’s decision-making, Today’s decision can’t change what has already happened, Have already been incurred, and you can’t get them back, Can be found as expenses on the income statement but also include costs for existing long-term assets and their related depreciation Period cost – cost of staying in business. Example of period cost – rent and deprecation of an office building, salaries or wages of office staff, adverting, telephone, and internet expense Product cost- is any cost incurred when making the item and ready to sale Example of product cost – direct materials and labor, and manufacturing overhead Variable costs - have a constant cost per unit and change in total based on usage of their cost driver If the cost driver increases total variable costs - increase. Fixed costs - are fixed in total and do not change as more units are made within the available capacity. Within the relevant range - fixed costs remain the same in total and the per unit amount will increase or decrease, depending on the level of production. Relevant range - is the range of units (activity level) that can be produced, from zero units up to a company’s capacity. Understanding Cost Behavior Helps Us to - Predict costs, Estimate costs, Budget costs ,Plan costs, Control costs Cost drivers- are the activities that cause a particular cost. The account analysis method -uses actual costs within a general ledger to predict its future cost. The high low method - uses actual cost relations to make predictions of future mixed costs The regression method - uses every point in a data set in a mathematical computation designed to minimize the vertical distance among the given data points. Linear cost function – variable cost x activity level + fixed cost Sales in Units to Break Even – total fixed cost / contribution margin per unit The margin of safety - is the difference between total unit sales (or sales in dollars) and the break even point in units (or sales dollars) Sales in units to achieve target profit – total fixed cost + target profit / contribution margin per unit Sales in dollar to achieve target profit - total fixed cost + target profit / contribution margin ratio Relevant cost are – differential , avoidable, and in the future Any fixed costs avoided by dropping a product line or closing a business segment should be - larger than the contribution margin given up A resource constraint - is a limitation on the availability of a particular input needed for production Direct fixed costs - are directly attributable to a product line. Segment margin - Sales minus Variable costs minus Direct fixed costs If a unit’s segment margin is large enough - it can cover its allocated fixed cost and still contribute to the overall company’s profit. Weighted Average Contribution Margin - Need a modified average contribution margin for all the product types sold, The relative sales mix of each product type provides the weightings, Each product generally has different selling prices and variable cost, and hence different contribution margins.
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3.2 Costs & revenues
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Ch 6 - Costs of Production
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Costs, costs, costs
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les prépositions fixes
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QUIZ #1 — POWER NOTES 1. Normative vs. Positive Political Science Normative = what SHOULD be. * Based on values, beliefs, and opinions. * Asks: “What should the government do?” Positive = what IS. * Based on evidence and observable facts. * Asks: “What actually happens?” Easy memory trick: 👉 Normative = “should” 👉 Positive = “is” Example: * “The government should provide free college.” → Normative * “States that spend more on education have higher graduation rates.” → Positive ⸻ 2. Approaches in Political Science An approach is basically a particular way of looking at politics. Know these: Rational Choice * Assumes people make decisions based on their interests and preferences. * People weigh costs and benefits. Behavioralism * Focuses on observable political behavior. * Looks at things like voting, public opinion, participation, etc. * Uses evidence/data to study behavior. Institutionalism * Focuses on institutions and rules. * Institutions can shape how people behave and what political outcomes happen. Constructivism * Focuses on how ideas, beliefs, identities, and social norms shape politics. Feminist approach * Examines how gender and power relationships affect politics. Normative approach * Focuses on questions about values, justice, rights, and what government ought to do. ⸻ 3. Methodologies Methodology = how political scientists study something. Two big categories: Quantitative * Uses numbers and statistics. * Example: Surveying 5,000 voters and analyzing their responses. Qualitative * Uses words, observations, interviews, documents, or detailed cases. * Example: Interviewing voters to understand why they support a candidate. If the professor says: “Describe one methodology.” You can say: Quantitative research uses numerical data and statistical analysis to identify patterns or relationships. That’s a solid answer. 👏 ⸻ 4. Theory A theory is an explanation of how or why something happens. It helps political scientists: * organize information * explain political behavior * make predictions that can be tested Example: A theory might explain why some people are more likely to vote than others. ⚠️ A theory in science does NOT mean “just a guess.” ⸻ 5. Transaction Costs Transaction costs = the time, effort, and resources required to reach an agreement or make a decision. Think: “How hard/expensive is it to get everyone to agree?” Example: If 500 people have to agree on one decision, getting everyone together, discussing the issue, and reaching an agreement creates transaction costs. Conformity Costs Conformity costs = the costs people face when they have to accept a decision they don’t personally prefer. Example: A group votes 8–2 to raise a fee. The two people who voted against it still have to pay it. 👉 That’s a conformity cost. ⸻ 6. Formal vs. Informal Institutions Formal institutions = Official rules and organizations. Examples: * Constitution * Congress * Courts * Laws * Government agencies Informal institutions = Unwritten rules, norms, traditions, and expectations. Examples: * Political traditions * Social expectations * Unwritten customs * Norms about how politicians are expected to behave Easy memory trick: 👉 Formal = written/official 👉 Informal = unwritten/social ⸻ 7. Overcoming Collective Action Problems Collective action problem = when individuals would benefit from working together, but each person has a reason NOT to participate. Example: Everyone wants a cleaner campus. But each student thinks: “Why should I pick up trash? Other people can do it.” That’s the problem. Ways institutions can help: * Incentives → reward people for participating * Penalties → punish people who don’t participate * Rules → require participation * Leadership/organization → coordinate people * Selective incentives → give specific benefits to people who participate ⭐ Important: Free rider problem = someone benefits from a group effort without helping pay or participate. ⸻ 8. Institutional Design Institutional design = creating rules and procedures that determine how political decisions are made. Basically: Who gets to do what, and what rules do they have to follow? Two important examples: Veto Power Veto power = the ability to stop or block a decision. Example: The president can veto legislation passed by Congress. Agenda Control Agenda control = the ability to decide which issues or proposals get considered. Basically: “What are we even going to talk about?” Someone who controls the agenda can influence which proposals get attention. ⸻ 9. Checks and Balances Checks and balances = each branch of government has powers that can limit the other branches. The three branches: 🏛️ Legislative — Congress * Makes laws ⚖️ Judicial — Courts * Interprets laws 🏠 Executive — President * Enforces laws Examples: Congress → President * Congress passes bills * Congress can override a presidential veto with enough votes President → Congress * President can veto bills Courts → Congress/President * Courts can declare government actions unconstitutional President → Courts * President nominates federal judges, subject to Senate confirmation Congress → Courts * Senate confirms federal judges * Congress controls federal funding and can change the structure/jurisdiction of lower federal courts within constitutional limits Main idea: No single branch is supposed to have unlimited power. ⸻ 🇺🇸 10. Articles of Confederation THIS ONE IS IMPORTANT. The Articles of Confederation were the first governing framework of the United States, used before the Constitution. The biggest problem: The national government was TOO WEAK. Under the Articles: * Congress had limited power * There was no separate executive branch * There was no national judicial branch * Congress couldn’t directly tax citizens * The national government had difficulty enforcing decisions * States retained a lot of power Why was this a problem? The national government had trouble: * raising money * paying debts * regulating commerce * responding effectively to national problems This helped lead to the Constitutional Convention of 1787 and eventually the Constitution. ⭐ Remember this: Articles of Confederation = weak national government Constitution = stronger national government with checks and balances ⸻ 🧠 THE STUFF I WOULD MEMORIZE FIRST If you’re short on time, memorize these: Normative = what SHOULD be. Positive = what IS. Rational choice = people make choices based on interests/costs and benefits. Behavioralism = studies observable political behavior. Quantitative = numbers/statistics. Qualitative = words, interviews, observations, cases. Theory = explanation of how/why something happens. Transaction costs = costs of reaching an agreement. Conformity costs = costs of accepting an outcome you don’t prefer. Formal institutions = official/written rules. Informal institutions = unwritten rules/norms. Collective action problem = difficulty getting people to work together. Free rider = gets the benefit without contributing. Veto power = ability to block a decision. Agenda control = ability to decide what gets considered. Checks and balances = branches limit each other’s power. Articles of Confederation = weak national government. 🔥 One-sentence version of the whole quiz: Political scientists study politics using different approaches and methods, while political institutions create rules that help people overcome collective-action problems, control costs, distribute power, and prevent any one part of government from becoming too powerful.
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