{"id":585,"date":"2015-10-17T17:47:21","date_gmt":"2015-10-17T17:47:21","guid":{"rendered":"https:\/\/courses.candelalearning.com\/managacct2x10xmaster\/?post_type=chapter&p=585"},"modified":"2016-06-15T17:41:32","modified_gmt":"2016-06-15T17:41:32","slug":"glossary-9","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-managacct\/chapter\/glossary-9\/","title":{"raw":"Glossary","rendered":"Glossary"},"content":{"raw":"

GLOSSARY<\/h3>\r\n
\r\n\r\nBudget variance<\/strong> The difference between the budgeted and actual amounts of an item.\r\n\r\nContribution margin<\/strong> Sales revenues less variable expenses.\r\n\r\nContribution margin format<\/strong> An income statement format that shows the contribution margin (Sales[latex]-[\/latex]Variable expenses) for a segment.\r\n\r\nContribution to indirect expenses<\/strong> Sales revenue less all direct expenses of the segment.\r\n\r\nControllable profits of a segment<\/strong> Profit of a segment when expenses under a manager's control are deducted from revenues under that manager's control.\r\n\r\nCost object<\/strong> A segment, product, or other item for which costs may be accumulated.\r\n\r\nCurrent replacement cost<\/strong> The cost of replacing the present assets with similar assets in the same condition as those now in use.\r\n\r\nDecentralization<\/strong> The dispersion of decision-making authority among individuals at lower levels of the organization.\r\n\r\nDirect cost (expense)<\/strong> A cost that is specifically traceable to a given cost object.\r\n\r\nExpense center <\/strong>A responsibility center incurring only expense items and producing no direct revenue from the sale of goods or services. Examples include the accounting department and the maintenance department.\r\n\r\nIndirect cost (expense)<\/strong> A cost that is not traceable to a given cost object but has been allocated to it.\r\n\r\nInvestment center<\/strong> A responsibility center having revenues, expenses, and an appropriate investment base.\r\n\r\nManagement by exception<\/strong> The principle that upper level management does not need to examine operating details at lower levels unless there appears to be a problem (an exception).\r\n\r\nMargin (as used in ROI)<\/strong> The percentage relationship of income (or profits) to sales.\r\n

[latex]\\text{Margin}=\\frac{\\text{Income}}{\\text{Sales}}\\\\[\/latex]<\/p>\r\nOriginal cost<\/strong> The price paid to acquire an asset.\r\n\r\nOriginal cost less accumulated depreciation<\/strong> The book value of an asset\u2014the amount paid less total depreciation taken.\r\n\r\nProfit center<\/strong> A responsibility center having both revenues and expenses.\r\n\r\nResidual income (RI)<\/strong>, Economic Value Added The amount of income a segment has in excess of the investment base times the cost of capital percentage. Residual income is equal to [latex]\\text{Income}-(\\text{Investment}\\times\\text{Cost of capital percentage})\\\\[\/latex].\r\n\r\nResponsibility accounting<\/strong> Refers to an accounting system that collects, summarizes, and reports accounting data relating to the responsibility of the individual managers. A responsibility accounting system provides information to evaluate each manager on revenue and expense items over which that manager has primary control.\r\n\r\nResponsibility center<\/strong> A segment of an organization for which a particular executive is responsible.\r\n\r\nReturn on investment (ROI)<\/strong> Calculates the return (income) as a percentage of the assets employed (investment).\r\n

[latex]\\text{Return on investment}=\\frac{\\text{Income}}{\\text{Investment}}\\text{or}\\frac{\\text{Income}}{\\text{Sales}}\\times\\frac{\\text{Sales}}{\\text{Investment}}\\\\[\/latex]<\/p>\r\nSegment<\/strong> A fairly autonomous unit or division of a company defined according to function or product line.\r\n\r\nSegmental net income<\/strong> The final total in the income statement; segmental revenues less all expenses (direct expenses and allocated indirect expenses).\r\n\r\nTransfer price<\/strong> An artificial price used when goods or services are transferred from one segment to another segment within the same company.\r\n\r\nTurnover (as used in ROI)<\/strong> The number of dollars of sales generated by each dollar of investment.\r\n

[latex]\\text{Turnover}=\\frac{\\text{Sales}}{\\text{Investment}}\\\\[\/latex]<\/p>\r\n\r\n<\/div>","rendered":"

GLOSSARY<\/h3>\n
\n

Budget variance<\/strong> The difference between the budgeted and actual amounts of an item.<\/p>\n

Contribution margin<\/strong> Sales revenues less variable expenses.<\/p>\n

Contribution margin format<\/strong> An income statement format that shows the contribution margin (Sales[latex]-[\/latex]Variable expenses) for a segment.<\/p>\n

Contribution to indirect expenses<\/strong> Sales revenue less all direct expenses of the segment.<\/p>\n

Controllable profits of a segment<\/strong> Profit of a segment when expenses under a manager’s control are deducted from revenues under that manager’s control.<\/p>\n

Cost object<\/strong> A segment, product, or other item for which costs may be accumulated.<\/p>\n

Current replacement cost<\/strong> The cost of replacing the present assets with similar assets in the same condition as those now in use.<\/p>\n

Decentralization<\/strong> The dispersion of decision-making authority among individuals at lower levels of the organization.<\/p>\n

Direct cost (expense)<\/strong> A cost that is specifically traceable to a given cost object.<\/p>\n

Expense center <\/strong>A responsibility center incurring only expense items and producing no direct revenue from the sale of goods or services. Examples include the accounting department and the maintenance department.<\/p>\n

Indirect cost (expense)<\/strong> A cost that is not traceable to a given cost object but has been allocated to it.<\/p>\n

Investment center<\/strong> A responsibility center having revenues, expenses, and an appropriate investment base.<\/p>\n

Management by exception<\/strong> The principle that upper level management does not need to examine operating details at lower levels unless there appears to be a problem (an exception).<\/p>\n

Margin (as used in ROI)<\/strong> The percentage relationship of income (or profits) to sales.<\/p>\n

[latex]\\text{Margin}=\\frac{\\text{Income}}{\\text{Sales}}\\\\[\/latex]<\/p>\n

Original cost<\/strong> The price paid to acquire an asset.<\/p>\n

Original cost less accumulated depreciation<\/strong> The book value of an asset\u2014the amount paid less total depreciation taken.<\/p>\n

Profit center<\/strong> A responsibility center having both revenues and expenses.<\/p>\n

Residual income (RI)<\/strong>, Economic Value Added The amount of income a segment has in excess of the investment base times the cost of capital percentage. Residual income is equal to [latex]\\text{Income}-(\\text{Investment}\\times\\text{Cost of capital percentage})\\\\[\/latex].<\/p>\n

Responsibility accounting<\/strong> Refers to an accounting system that collects, summarizes, and reports accounting data relating to the responsibility of the individual managers. A responsibility accounting system provides information to evaluate each manager on revenue and expense items over which that manager has primary control.<\/p>\n

Responsibility center<\/strong> A segment of an organization for which a particular executive is responsible.<\/p>\n

Return on investment (ROI)<\/strong> Calculates the return (income) as a percentage of the assets employed (investment).<\/p>\n

[latex]\\text{Return on investment}=\\frac{\\text{Income}}{\\text{Investment}}\\text{or}\\frac{\\text{Income}}{\\text{Sales}}\\times\\frac{\\text{Sales}}{\\text{Investment}}\\\\[\/latex]<\/p>\n

Segment<\/strong> A fairly autonomous unit or division of a company defined according to function or product line.<\/p>\n

Segmental net income<\/strong> The final total in the income statement; segmental revenues less all expenses (direct expenses and allocated indirect expenses).<\/p>\n

Transfer price<\/strong> An artificial price used when goods or services are transferred from one segment to another segment within the same company.<\/p>\n

Turnover (as used in ROI)<\/strong> The number of dollars of sales generated by each dollar of investment.<\/p>\n

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