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AC Chapters 1,2,3
| Term | Definition |
|---|---|
| financial accounting | the phase of accounting that is concerned with reporting historical financial information to external parties, such as stockholders, creditors, and regulators. |
| managerial accounting | the phase of accounting that is concerned with providing information to managers for use within the organization. |
| cost object | anything for which cost data are desired. Examples of cost objects are products, customers, geographic regions, and parts of the organization such as departments or divisions. |
| direct cost | A cost that can be easily and conveniently traced to a specified cost object. |
| indirect cost | A cost that cannot be easily and conveniently traced to a specified cost object. |
| common cost | a cost that is incurred to support a number of cost objects but that cannot be traced to them individually. |
| raw materials | any materials that go into the final product. |
| direct materials | materials that become an integral part of a finished product and whose costs can be conveniently traced to it. |
| direct labor | factory labor costs that can be easily traced to individual units of product. Also called touch labor. |
| prime cost | factory labor costs that can be easily traced to individual units of product. Also called touch labor. |
| manufacturing overhead | all manufacturing costs except direct materials and direct labor. |
| indirect materials | small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it. |
| indirect labor | the labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products. |
| conversion cost | direct labor cost plus manufacturing overhead cost. |
| selling costs | all costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer. |
| administrative costs | all executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling. |
| product (inventorial) costs | all costs that are involved in the acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead. |
| work in process | units of product that are only partially complete and will require further work before they are ready for sale to the customer. |
| finished goods | units of product that have been completed but not yet sold to customers. |
| period costs | costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued. |
| cost behavior | the way in which a cost reacts to changes in the level of activity. |
| cost structure | the relative proportion of fixed, variable, and mixed costs in an organization. |
| variable cost | a cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant per unit. |
| activity base | a measure of whatever causes the incurrence of a variable cost. |
| fixed cost | a cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity. |
| committed fixed costs | investments in facilities, equipment, and basic organizational structure that can’t be significantly reduced even for short periods of time without making fundamental changes. |
| discretionary fixed costs | those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research. |
| relevant range | the range of activity within which assumptions about variable and fixed costs behavior are valid. |
| mixed cost | a cost that contains both variable and fixed cost elements. |
| relevant cost | a cost that should be considered when making decisions. |
| relevant benefit | a benefit that should be considered when making decisions. |
| differential cost | a future cost that differs between any two alternatives. |
| differential revenue | future revenue that differs between any two alternatives. |
| incremental cost | an increase in cost between two alternatives. |
| opportunity cost | the potential benefit that is given up when one alternative is selected over another. |
| sunk cost | a cost that has already been incurred and that cannot be changed by a decision made now or in the future. |
| contribution approach | an income statement format that organizes 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 | the amount remaining from sales revenues after all variable expenses have been deducted. |
| absorption costing | a costing method that includes all manufacturing costs–direct materials, direct labor, and both variable and fixed manufacturing overhead–in unit product costs. |
| job-order costing | a costing system used in situations where many different products, jobs, or services are produced each period. |
| bill of materials | a document that shows the quantity of each type of direct material required to make a product. |
| materials requisition form | a document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials. |
| job cost sheet | a form that records the direct materials, direct labor, and manufacturing overhead cost charged to a job. |
| time ticket | a document that is used to record the amount of time an employee spends on various activities. |
| allocation base | a measure of activity such as direct labor-hours or machine hours that is used to assign costs to cost objects. |
| predetermined overhead rate | a rate used to charge manufacturing overhead costs to jobs that is established in advance for each period. It is computed by dividing the estimated total manufacturing overhead cost for the period by the estimated total amount of the allocation base for t |
| overhead application | the process of assigning overhead cost to specific jobs. |
| normal cost system | a costing system in which overhead costs are applied to a job multiplying a POHR by the actual amount of the allocation base incurred by the job. |
| cost driver | a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs. |
| plantwide overhead rate | a single predetermined overhead rate that is used throughout a plant. |
| multiple predetermined overhead rates | a costing system with multiple overhead cost pools and a different predetermined overhead rate for each cost pool, rather than a single predetermined overhead rate for the entire company. Each production department may be treated as a separate overhead co |
| cost-plus pricing | a pricing method in which a predetermined markup is applied to a cost base to determine the target selling price. |
| absorption costing | a costing method that includes all manufacturing costs–direct materials, direct labor, and both variable and fixed manufacturing overhead–in unit product costs. |
| allocation base | a measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects. |
| raw materials | any materials that go into the final product. Work in Process – units of product that are only partially complete and will require further work before they are ready for sale to the customer. |
| finished goods | units of product that have been completed but not yet sold to customers. |
| cost of goods manufactured | the manufacturing costs associated with units of product that were finished during the period. |
| schedule of cost of goods manufactured | a schedule that contains three elements of product costs–direct materials, direct labor, and manufacturing overhead–and that summarizes the portions of those costs that remain in ending Work in Process inventory and that are transferred out of Work in Pro |
| underapplied overhead | a debit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is less than the amount of overhead cost actually incurred during a period. |
| overapplied overhead | a credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is greater than the amount of overhead cost actually incurred during a period. |
| absorption costing | a costing method that includes all manufacturing costs–direct materials, direct labor, and both variable and fixed manufacturing overhead–in unit product costs. |
| allocation base | a measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects. |
Created by:
lasmith9