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ACG Exam 1
| Term | Definition |
|---|---|
| activity | An event that causes the consumption of overhead resources. |
| activity cost pool | A “bucket” in which costs are accumulated that relate to a single activity measure in an activity-based costing system |
| activity-based costing | A two-stage costing method in which overhead costs are assigned to products on the basis of the activities they require. |
| batch-level activities | Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in a batch. The amount of resources consumed depends on the number of batches run rather than on the number of units in the batch. |
| contribution margin | The amount remaining from sales revenues after all variable expenses have been deducted. |
| cost driver | A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs. |
| cost of goods manufactured | The manufacturing costs associated with units of product completed during the period. |
| coversion cost | Direct labor cost plus manufacturing overhead cost. |
| customer-level activities | like batch level |
| differential cost | A future cost that differs between any two alternatives. |
| direct cost | A cost easily traced to a specified cost object. |
| direct labor | Factory labor costs easily traced to specific products. Also called touch labor. |
| direct material | Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. |
| finished goods inventory | A budget showing the dollar amount of unsold finished goods inventory appearing on the ending balance sheet. |
| fixed cost | remains constant in total, regardless in the changes in activity |
| indirect cost | A cost that cannot be easily traced to a specified cost object. |
| job order costing | A costing system used in situations where many different products, jobs, or services are produced each period. |
| manufacturing overhead | All manufacturing costs except direct materials and direct labor. |
| mixed cost | A cost with variable and fixed cost elements. |
| opportunity cost | The potential benefit that is given up when one alternative is selected over another. |
| organization-sustaining activities | Activities that are carried out regardless of which products are produced, how many batches are run, or how many units are made. |
| underapplied overhead | A debit balance in the Manufacturing Overhead account occurring when the overhead cost applied to Work in Process is less than the overhead cost actually incurred. |
| period costs | Costs taken directly to the income statement as expenses in the period incurred or accrued. |
| predetermined overhead rate | A rate used to charge manufacturing overhead cost 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. |
| prime costs | Direct materials cost plus direct labor cost. |
| product costs | All costs involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead. Also see Inventoriable costs. |
| product-level activities | Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run. |
| raw materials | Any materials going into the final product. |
| relevant range | The range of activity within which assumptions about variable and fixed cost behavior are valid. |
| sunk cost | A cost that has already been incurred and that cannot be changed by any decision made now or in the future. |
| unit-level activities | Activities that arise as a result of the total volume of goods and services that are produced, and that are performed each time a unit is produced. |
| 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. |
| work in process (WIP) | Partially complete units of product requiring further work before they are ready for sale to the customer. |
| over applied overhead | A credit balance in the Manufacturing Overhead account that occurs when the overhead cost applied to Work in Process is greater than the overhead cost actually incurred during a period |
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