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Cost Accounting
Chapter 4
11
Accounting
Undergraduate 3
06/08/2010

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Term
Cost Object
Definition
Anything for which a separate measurement of costs is desired
Term
Direct Costs of a cost object
Definition
traceable to a particular cost object
Term
Indirect costs of a cost object
Definition
costs that are related to a cost object but cannot be traced (also referred to as overhead)
Term
Cost Pool
Definition
A grouping of individual cost items
Term
cost allocation base
Definition
a basis of systematically linking indirect cost to a cost object
Term
Job Order Systems (Types of Cost Systems)
Definition
Cost object is a distinct product or service called a job, used for specific units or small batches (houses, airplanes, furniture, etc.)
Term
Process Cost Systems (Types of Cost Systems)
Definition
Cost object is masses of identical or similar units, used for mass production of LIKE units (screws, folding chairs, etc)
Term
Normal Costin
Definition
Direct costs are traced to particular job, indirect costs are allocated based on a predetermined or budgeted overhead rate
Term
Predetermined Overhead Rate
Definition
Indirect cost is estimated for the period, an appropriate cost driver is selected. Rate= Overhead Dollars Budgeted / Quantity of Cost Driver
Term
Applied Overhead
Definition
Charged to WIP as overhead rate x cost driver activity for specific item
Term
Variance between Applied and Actual Overhead
Definition
If small, charged to Cost of Goods Sold
If material, proportionally (by ending balance) charged to WIP inv, FG inv, and CGS
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