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| anything for which cost data are desired- products, customers, plants, office locations and departments. Can be either direct or indirect. |
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| a cost that can be easily and conveniently traced to a specified cost object |
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| a cost that cannot be easily and conveniently traced to a specific cost object. |
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| a cost that is incurred to support a number of cost objects, but cannot be traced to them individually. This is a type of Indirect Cost. |
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| The materials that go into the final product. Actually refer to any materials that are used in the final product. The final product of one company can become the raw material of another company. |
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| refers to raw materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product. |
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| Consists of labor costs that can be traced to individual units of product. |
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| includes all manufacturing costs, except direct materials and direct labor. Includes a portion of raw materials known as indirect materials as well as indirect labor. Also includes indirect costs that cannot be readily traced to finished products- depreciation, utility, property tax, insurance premium. |
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| Refers to employees such as janitors, supervisors, materials handlers, maintenance workers, and night security guards that play an essential work in a manufacturing facility. |
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| refers to the sum of direct labor and manufacturing overhead. |
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| all costs that are incurred to secure customer orders and get the finished product to the customer. Sometimes called order-getting and order-filling costs. |
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| include all costs associated with the general management of an organization rather than manufacturing or selling. Include executive compensation, general accounting, legal counsel, secretarial, public relations, and similar costs involved in the overall administration of the organization as a whole |
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| based on the accrual concept. Costs incurred to generate a particular revenue should be recognized in the same period that the revenue is recognized. If a cost is incurred to acquire or make something that will eventually be sold, then the cost should be recognized only when the sale takes place- when the benefit occurs. This is a product cost. |
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| all costs involved in acquiring or making a product. Attach to a unit of product as it's purchased or manufactured, and stay attached as long as it remains in inventory. When they are sold, the costs are released from inventory as expenses, typically called costs of goods sold. |
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| another name for product costs, since they are initially assigned to inventories. |
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| Units of product that are only partially complete and will require further work before they are ready for sale to the customer. |
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| consist of completed units of product that have not yet been sold to customers. |
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| the process of cost-moving |
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Definition
1. When direct materials are used in production, their costs are transferred from Raw Materials to Work in Process
2. Direct labor and manufacturing overhead costs are added to WIP to convert direct materials into finished goods 3. Once units of product are completed, costs are transferred from WIP to Finished Goods.
4. Once a manufacturer sells its finished goods to customers, costs are transferred from Finished Goods to Cost of Goods Sold |
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| all of the costs that are not product costs. All Selling/Administrative expenses are treated as these. Sales commissions, advertising, executive salaries, public relation, and rental costs of administrative offices. Not included as part of the cost of either purchased or manufactured goods. Instead, are expensed on the income statement in the period in which they are incurred. |
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| refers to how a cost reacts to changes in the level of activity. As activity level rises and falls, a particular cost may rise and fall as well, or remain constant. |
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| varies, in total, in direct proportion to changes in the level activity. These would be things like cost of goods sold, direct materials, direct labor, indirect materials, supplies, power, commissions, and shipping costs. |
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| For a cost to be variable, it has to be variable to something. This is that something. It's a measure of whatever causes the incurrence of a variable cost. Also called a cost driver. |
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| A cost that remains constant regardless of changes in the level of activity. |
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| Discretionary fixed costs |
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| AKA managed fixed costs, these usually come from annual decisions by management to spend on certain fixed cost items. |
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| the range of activity within which the assumption that cost behavior is strictly linear is reasonably valid |
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| Contains both variable and fixed costs. Also called semivariable costs. |
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Term
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Definition
1. Y=a+bx
Y = total mixed cost. a = total fixed cost. B = variable cost/unit of activity. x = activity level.
2. Product cost = Direct Materials + Direct Labor + Manufacturing Overhead
3. Conversion cost = Direct Labor + Manufacturing Overhead
4. Prime cost = Direct Materials + direct Labor
5. Variable ManuCost = DM + DL + vMOH
6. FixCos = fixMOH + fixSellExp +FixAdminExp |
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Cost- a cost that should be considered when making decisions
Benefit- benefit that should be considered when making decisions. |
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| a future cost that differs between two alternatives. |
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| Future costs that differs between any two alternatives. This is an example of a relevant benefit. Any future cost/benefit that does not differ between the alternatives is irrelevant and should be ignored. |
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| A differential cost is also known as one of these. Technically, there's this and decremental costs. These are increases in cost between alternatives, and those are decreases in cost between alternatives. |
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| The revenue that can be obtained from selling one more unit of product |
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| the cost involved in producing one more unit of product. |
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| the potential benefit that is given up when one alternative is selected over another. |
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| a cost that has already been incurred and that cannot be changed by any decision made now or in the future. |
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| Controllable/Uncontrollable cost |
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Definition
Controllable cost can be influenced by the manager being evaluated.
An uncontrollable cost CANNOT be influenced by the manager being evaluated. |
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| value-added/non-value-add costs |
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Definition
increases the value of products and services provided to the company's stakeholders.
Non-value added does not provide any benefit to the company's stakeholders |
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Definition
| an income statement format that organizes costs by their behavior. Costs are separated into variables and fixed categories rather than being separated into product and period costs for external reporting purposes |
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| the amount remaining from sales revenues after all variable expenses have been deducted. The amount contributes toward covering fixed expenses and then towards profits for the period. |
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| all manufacturing costs, both fixed and variable, are assigned to units of product that are said to fully absord manufacturing costs. |
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| A common type of absorption costing used in situations where many different products, each with individual and unique features, are produced each period. |
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Definition
| In a job-order costing system, costs are traced and allocated to jobs and then the costs of the job are divided by the number of units of the the job to arrive at an average cost per unit. This is the cost per unit. |
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Definition
| a document that lists the quantity of each type of direct material needed to complete a unit of product. |
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| materials requisition form |
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Definition
| a document that specifies the type and quantity of materials to be drawn from the storeroom and identifies the job that will be charged for the cost of the materials. |
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| records the materials, labor, and manufacturing overhead charged to a job. |
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| An hour-by-hour summary of the employee's activities throughout the day. |
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Definition
| a measure such as DLH or MH that is used to assign overhead costs to products and services. |
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Term
| Predetermined Overhead Rate(POHR) |
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Definition
computed by dividing the total estimated manufacturing overhead cost by the estimated total amount of the allocation base.
So, POHR = est.MOH/est.allocation base |
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Definition
the process of assigning overhead cost to jobs.
Formula is POHR(Actual DLH). |
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Definition
| A costing system in which overhead costs are applied to a job by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job. |
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Definition
| a actor that causes overhead costs. If the base in the POHR does not "drive" overhead costs, it will not accurately measure the cost of overhead resources used by each job. |
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| Plantwide Overhead Rate (PnHR) |
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Definition
| A single POHR that is used throughout a plant. |
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Definition
| A costing system in with multiple POHR cost pools and a different POHR for each pool, rather than a single POHR for the entire company. Each Production department may be treated as a separate overhead cost pool. |
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Definition
| a pricing method in which a predetermined markup is applied to a cost base to determine the target sselling price. |
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| Underapplied/Overapplied overhead |
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Definition
When a company applies less overhead to production than it actually incurs, it creates what is known as underapplied overhead.
When a company applies MORE overhead to production than it actually incurs, it results in overapplied overhead. |
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| Cost of Goods Manufactured |
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Definition
| The manufacturing costs associated with units of product that were finished during the period. |
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Definition
| A schedule that contains three elements of product costs- Direct Materials, Direct Labor, and Manufacturing Overhead- and summarizes the portions of those costs that remain in ending WIP inventory and that are transferred out of WIP into Finished Goods. |
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| Total manufacturing costs added to production formula |
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Definition
| Manufacturing costs added to production = direct materials used in production + direct labor + manufacturing overhead applied to work in process |
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Definition
| COGS = Beginning WIP inventory + Manufacturing costs added to production - ending WIP inventory |
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Term
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Definition
| Unadjusted COGS = beginning finished goods inventory + COGM - ending finished goods inventory |
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