Garrison, Chapter 1, Managerial Accounting
Exam Study Guide.
Activity Base - answer✔A measure of whatever causes the incurrence of a variable cost. For
example, the total cost of surgical gloves in a hospital will increase as hte number of surgeries
increases. Therefore, the number of surgeries in the activity base that explaines th total cost of
surgical gloves.
Administrative Costs - answer✔All executive, organizational, clerical costs associated with the
general management of an organization rather than with manufacturing or selling.
Committed fixed Costs - answer✔Investments in facilities, equipment, and basic organizational
structure that can't be significantly reduced even for short periods of time wihtout making
fundamental changes.
Common costs - answer✔A cost that is incurred to support a number of cost objects but that
cannot be traced to them individually.
Contribution Approach - answer✔An income statement format that organizations costs by their
behavior. Costs are separated into variable and fixed categories rather than being separated into
product and period costs for external reporting purposes.
Contribution Margin - answer✔The amount remaining from sales revenues afer all variable
expenses have been deducted.
Conversion Cost - answer✔Direct Labor Cost Plus Manufacturing Overhead Cost
Cost Behavior - answer✔The way in which a cost reacts to changes in the level of activity
Cost Structure - answer✔The relative proportion of fixed, variable, and mixed costs in an
organization.
Differential Costs - answer✔A future costs that differs between an two alternatives
Differential Revenue - answer✔A future revenue that differs between two alernatives
Direct Cost - answer✔A cost that can be easily an conveniently traced to a specified cost object.
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