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CA Final

Concepts of Ch.14-16 + Randoms

TermDefinition
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