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Description
Flashcards by David Esch, updated about 2 months ago
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Created by David Esch
about 2 months ago
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| Question | Answer |
| Activity Base | A measure of whatever causes the incurrence of a variable cost. For example, the total cost of surgical gloves in a hospital will increase as the number of surgeries increases. Therefore, the number of surgeries is the activity base that explains the total cost of surgical gloves. |
| Administrative Costs | All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling. |
| 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. |
| Common Cost | A cost incurred to support a number of cost objects that cannot be traced to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot’s wage is caused by any one passenger taking the flight. |
| Contribution Approach | An income statement that separates costs into variable and fixed categories, first deducting all variable expenses from sales to obtain the contribution margin. |
| Contribution Margin | The amount remaining from sales revenues after all variable expenses have been deducted. |
| Conversion Cost | Direct Labor cost plus manufacturing overhead cost |
| Cost Behavior | The way in which a cost reacts to changes in the level of activity |
| 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 |
| Cost Structure | The relative proportion of fixed, variable, or mixed costs in an organization |
| Differential Cost | A future cost that differs between two alternatives |
| Differential Revenue | Future Revenue that differs between 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 Materials | Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. |
| Discretionary Fixed Costs | Fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research. |
| Financial Accounting | The phase of accounting that reports with reporting historical financial information to external parties, such as stockholders, creditors, and regulators. |
| Finished Goods | Units of a product that have been completed but not yet sold to customers |
| 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. |
| Incremental Cost | An increase in cost between two alternatives |
| Indirect Cost | A cost that cannot be easily traced to a specified cost object |
| Indirect Labor | The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be easily traced to particular products. |
| 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 traced to it. |
| Inventoriable cost | Synonym for product costs |
| Managerial Accounting | The phase of accounting that provides information to managers for use within the organization. |
| Manufacturing Overhead | All manufacturing cost except direct materials and direct labor |
| Mixed Cost | A cost with variable and fixed cost element |
| Opportunity Cost | The potential benefit given up when one alternative is selected over another. |
| Period Costs | Costs taken directly to the income statement as expenses in the period incurred or accrued |
| Prime Cost | 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. |
| Raw Materials | Any Materials going into the final product |
| Relevant benefit | A benefit that should be considered when making decisions |
| Relevant Cost | A cost that should be considered when making decisions |
| Relevant Range | The range of activity within which assumptions about variable and fixed cost behavior are valid |
| Selling Costs | All costs incurred to secure customer orders and get the finished product or service into the hands of the customer. |
| Sunk Cost | A cost already incurred that cannot be changed by any decision made now or in the future. |
| 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 | Partially complete units of product requiring more work before they are ready for sale to the customer. |
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