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CA Final
Concepts of Ch.14-16 + Randoms
| Term | Definition |
|---|---|
| Cause-and-effect | Primary criterion used in activity-based costing |
| Cause-and-effect | One of the preferred methods of allocation |
| Cause-and-effect | Has a linkage between the amount of cost incurred and the reason for the cost |
| Benefits received | Allocates cost to cost object that received the benefit of cost |
| Fairness | A problematic allocation criterion |
| Fairness | Often result in person who is most persuasive would get most favorable allocation |
| Fairness | More of an objective in allocation rather than a valid criterion |
| Ability to bear | A problematic allocation criterion |
| Ability to bear | Costs are allocated based upon which cost object can best afford the allocation |
| Ability to bear | Highly subjective and should only be used as a last resort |
| Cause-and-effect | Criteria to guide cost allocation |
| Benefits received | Criteria to guide cost allocation |
| Fairness | Criteria to guide cost allocation |
| Ability to bear | Criteria to guide cost allocation |
| Customer output unit-level costs | Per unit |
| Customer batch-level costs | Cost per order ( ex. per delivery ) |
| Customer-sustaining costs | Cost to support individual customers regardless of units and batches |
| Distribution-channel costs | Costs relate to the distribution channel rather than to each unit of product, each batch of product, or specific customer |
| Distribution-channel costs | Examples of this is distribution manager's salary and retail distribution manager's salary |
| Division-sustaining costs | Costs that cannot be traced to a product, customer or even a distribution channel. ( ex. division manager’s salary ) |
| Customer output unit-level costs | Level of customer-cost heirarchy |
| Customer batch-level costs | Level of customer-cost heirarchy |
| Customer-sustaining costs | Level of customer-cost heirarchy |
| Distribution-channel costs | Level of customer-cost heirarchy |
| Division-sustaining costs | Level of customer-cost heirarchy |
| Operating Department | Directly adds value to a product or service |
| Support Department | Provides the services that assist other internal departments in the company |
| Operating Department | Otherwise known as production department |
| Support Department | Otherwise known as service department |
| Single-rate Method | Simple to implement |
| Single-rate Method | Allocates cost using the same rate per unit of a single allocation base |
| Dual-rate Method | Segregates costs within each cost pool into two segments: variable and fixed-cost pool |
| Dual-rate Method | Each pool uses a different cost-allocation base |
| Dual-rate Method | Complex to implement |
| Direct Method | Method to allocate support department costs to operating department |
| Step-down Method | Method to allocate support department costs to operating department |
| Reciprocal Method | Method to allocate support department costs to operating department |
| Direct Method | Allocates support department costs only to operating department |
| Step-down Method | Partially recognizes the mutual services provided among all support departments |
| Reciprocal Method | Fully recognizes the mutual services provided among all support departments |
| Reciprocal Method | Most precise method of the three methods to allocate costs |
| Direct Method | Widely use method and simple to compute and use |
| Joint Cost | Costs of a single production process that yields multiple products simultaneously |
| Splitoff Cost | Where two or more products become separately identifiable |
| Separable Cost | All costs incurred beyond splitoff point |
| Separable Cost | Assignable to each specific products |
| Main Product | Output of a joint production process that yields a product that has a high sales value compared to sales value of other outputs |
| Joint Products | Outputs of a joint production process that yields two or more products with high sales value compared to any otheroutputs |
| Byproducts | Outputs of a joint production process that have low sales values compare to other sales values of other outputs |
| Accounting byproduct using production method | Recognizes byproduct inventory as it is created and sales & costs at the time of the sale |
| Accounting byproduct using sales method | Only recognizes sales at the time of the sale |
| Scrap | Residual material results from manufacturing a product, has low total sales value compared with total salues value of product |
| Spoilage | Either discarded or sold at reduced prices |
| Rework | Repaired and sold as good finished goods |
| Cost hierarchy | Unit-level, batch-level, product-sustatining , facility-sustaining |
| Unit-level costs | Costs of activities performed on each individual unit of a product or service ( costs increase as the number of units increases ) |
| Batch-level costs | Costs of activities related to a group of units of products or services |
| Batch-level costs | Example of this cost is set-up costs |
| Product-sustaining costs | Costs of activites undertaken to support individual products or services regardless of number of units or batches produced |
| Product-sustaining costs | Example of this cost is design costs |
| Facility-sustaining costs | Costs of activities that cannot be traced to individual products or services but support organization as a whole |
| Facility-sustaining costs | Example of this cost is general administration, rent, building security |
| Job-costing | Distinct cost objects and each consumes different resources |
| Process-costing | Mass production of identical or similar products |
Created by:
ltt
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