financial terms. C

Capital budgeting The process of making capital investment decisions. Capital investment decisions The process of planning, setting goals and priorities, arranging financing, and identifying criteria for making longterm investments.

Carrying costs The costs of holding inventory.

Cash budget A detailed plan that outlines all sources and uses of cash. Causal factors Activities or variables that invoke service costs. Generally, it is desirable to use causal factors as the basis for allocating service costs. Centralized decision making A system in which decisions are made at the top level of an organization and local managers are given the charge to implement them.

Certified Internal Auditor (CIA) A person who has passed a comprehensive examination designed to ensure technical competence and has two years’ experience.

Certified Management Accountant (CMA) A person who has passed a rigorous qualifying examination, has met an experience requirement, and participates in continuing education. Certified Public Accountant (CPA) A person who is permitted (by law) to serve as an external auditor and who must pass a national examination and be licensed by the state in which he or she practices.

Continuous replenishment A system where a manufacturer assumes the inventory management function for the retailer.

Contribution margin Sales revenue minus total variable cost or price minus

unit variable cost.

Contribution margin ratio Contribution margin divided by sales revenue. It is the proportion of each sales dollar available to cover fixed costs and provide for profit.

Control The process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from planned performance.

Control activities Activities performed by an organization to prevent or detect poor quality (because poor quality may exist).

Control costs Costs incurred from performing control activities.

Control limits The maximum allowable deviation from a standard.

Controllable costs Costs that managers have the power to influence.

Controller The chief accounting officer; supervises all accounting departments.

Controlling The managerial activity of monitoring a plan’s implementation and taking corrective action as needed.

Conversion cost The sum of direct labor cost and overhead cost.

Core objectives and measures Those objectives and measures common to most organizations.

Cost The cash or cash equivalent value sacrificed for goods and services that are expected to bring a current or future benefit to the organization. Cost assignment The process of associating the costs, once measured, with the units produced.

Cost behavior The way in which a cost changes in relation to changes in activity usage.

Cost center A division of a company that is evaluated on the basis of cost. Coefficient of correlation The square root of the coefficient of determination, which is used to express not

only the degree of correlation between two variables but also the direction of the relationship.

Coefficient of determination The percentage of total variability in a

dependent variable (e.g., cost) that is explained by an independent variable (e.g., activity level). It assumes a value between 0 and 1.

Committed fixed expenses Expenses incurred for the acquisition of longterm activity capacity, usually as the result of strategic planning.

Committed resources Resources that are purchased in advance of usage. These resources may or may not have unused (excess) capacity.

Common costs The costs of resources used in the output of two or more services or products.

Common fixed expenses Fixed expenses that cannot be directly traced to individual segments and that are unaffected by the elimination of any one segment.

Comparable uncontrolled price method The transfer price most preferred by the Internal Revenue Service under Section 482. The comparable uncontrolled price is essentially equal to the market price.

Compounding of interest Paying interest on interest.

Constraint set The collection of all constraints that pertain to a particular optimization problem.

Constraints Mathematical expressions that express resource limitations. Consumption ratio The proportion of

an overhead activity consumed by a product.

Continuous budget A moving twelvemonth budget with a future month added as the current month expires. Continuous improvement The process of searching for ways of increasing the overall efficiency and productivity of activities by reducing waste, increasing quality, and reducing costs. 850 ?

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Cost formula A linear function, Y _ F _ VX, where Y _ Total mixed cost, F _ Fixed cost, V _ Variable cost per unit of activity, and X _ Activity level.

Cost measurement The act of determining the dollar amounts of direct materials, direct labor, and overhead used in production.

Cost object Any item, such as products, departments, projects, activities, and so on, for which costs are measured and assigned.

Cost of capital The cost of investment funds, usually viewed as a weighted average of the costs of funds from all sources.

Cost of goods manufactured The total cost of goods completed during the current period.

Cost of goods sold The cost of direct materials, direct labor, and overhead attached to the units sold.

Cost of goods sold budget The estimated costs for the units sold.

Cost-plus method A transfer price acceptable to the Internal Revenue

Service under Section 482. The costplus method is simply a cost-based transfer price.

Cost reconciliation The final section of the production report that compares