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Survey of Accounting 4e
Chapter 10 Accounting Systems for Manufacturing Business
39
Accounting
Graduate
12/01/2008

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Term
Activity-based costing (ABC)
Definition
An accounting framework based on determining the cost of activities and allocating these costs to products using activity rates.
Term
Conversion costs
Definition
The combination of direct labor and factory overhead costs
Term
Cost
Definition
Payment of cash (or a commitment to pay cash in the future) for the purpose of generating revenues.
Term
Cost accounting system
Definition
System used to accumulate manufacturing costs for decision-making and financial reporting purposes.
Term
Cost allocation
Definition
The process of assigning indirect costs to a cost object, such as a job.
Term
Cost of goods sold
Definition
The cost of the manufactured product sold.
Term
Direct labor cost
Definition
Wages of factory workers who are directly involved in converting materials into a finished product.
Term
Direct materials cost
Definition
The cost of materials that are an integral part of the finished product.
Term
Electronic data interchange (EDI)
Definition
An information technology that allows different business organizations to use computers to communicate orders, relay information, and make or receive payments.
Term
Employee involvement
Definition
Philosophy that grants employees the responsibility and authority to make their own decisions about their operations.
Term
Factory overhead cost
Definition
All of the costs of operating the factory except for direct materials and direct labor.
Term
Finished goods inventory
Definition
The cost of finished products on hand that have not been sold.
Term
Finished goods ledger
Definition
The subsidiary ledger that contains the individual accounts for each kind of commodity or product produced.
Term
Job cost sheet
Definition
An account in the work in process subsidiary ledger in which the costs charged to a particular job order are recorded.
Term
Job order cost system
Definition
A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.
Term
Just-in-time (JIT) manufacturing
Definition
A business philosophy that focuses on eliminating time, cost, and poor quality within manufacturing processes.
Term
Lead time
Definition
The elapsed time between starting a unit of product into the beginning of a process and its completion.
Term
Managerial accounting
Definition
The branch of accounting that uses both historical and estimated data in providing information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies.
Term
Materials inventory
Definition
The cost of materials that have not yet entered into the manufacturing process.
Term
Materials ledger
Definition
The subsidiary ledger containing the individual accounts for each type of material.
Term
Materials requisitions
Definition
The form or electronic transmission used by a manufacturing department to authorize the issuance of materials from the storeroom.
Term
Nonvalue-added lead time
Definition
The time that units wait in inventories, move unnecessarily, and wait during machine breakdowns.
Term
Overapplied factory overhead
Definition
The amount of factory overhead applied in excess of the actual factory overhead costs incurred for production during a period.
Term
Period costs
Definition
Those costs that are used up in generating revenue during the current period and that are not involved in the manufacturing process.
Term
Predetermined factory overhead rate
Definition
The rate used to apply factory overhead costs to the goods manufactured. The rate is determined from budgeted overhead cost and estimated activity usage data at the beginning of the fiscal period.
Term
Predetermined factory overhead rate
Definition
The rate used to apply factory overhead costs to the goods manufactured. The rate is determined from budgeted overhead cost and estimated activity usage data at the beginning of the fiscal period.
Term
Process cost system
Definition
A type of cost accounting system in which costs are accumulated by department or process within a factory.
Term
Process-oriented layout
Definition
Organizing work in a plant or administrative function around processes (tasks).
Term
Product costs
Definition
The three components of manufacturing cost: direct materials, direct labor, and factory overhead costs.
Term
Product-oriented layout
Definition
Organizing work in a plant or administrative function around products; sometimes referred to as product cells.
Term
Pull manufacturing
Definition
A just-in-time method wherein customer orders trigger the release of finished goods, which trigger production, which triggers release of materials from suppliers.
Term
Push manufacturing
Definition
Materials are released into production and work in process is released into finished goods in anticipation of future sales.
Term
Receiving report
Definition
The form or electronic transmission used by the receiving personnel to indicate that materials have been received and inspected.
Term
Setup
Definition
The effort required to prepare an operation for a new production run.
Term
Supplier partnering
Definition
A just-in-time method that views suppliers as a valuable contributor to the overall success of the business.
Term
Time tickets
Definition
The form on which the amount of time spent by each employee and the labor cost incurred for each individual job, or for factory overhead, are recorded.
Term
Underapplied factory overhead
Definition
The actual factory overhead costs incurred in excess of the amount of factory overhead applied for production during a period.
Term
Value-added lead time
Definition
The time required to manufacture a unit of product or other output.
Term
Work in process inventory
Definition
The direct materials costs, the direct labor costs, and the factory overhead costs that have entered into the manufacturing process but are associated with products that have not been finished.
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