ACCT102 Ch. 2

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37 terms

administrative costs

all executive, organization, and clerical costs associated with the general management of an organization rather than with manufacturing or selling; a nonmanufacturing/period cost; i.e. executive compensation, general acct, secretarial, public relations

conversion cost

direct labor cost plus manufacturing overhead cost

cost of goods manufactured

the manufacturing costs associated with the goods that were finished during the period; need to adjust total manufacturing cost with cost for partially completed goods - work in process

direct cost

a cost that can be easily and conveniently traced to a specified cost object

indirect cost

a cost that cannot be easily and conveniently 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 or conveniently traced to it

inventoriable costs

synonym for product costs; costs go directly into inventory acct as they are incurred and remain as assets if goods are only partially completed or are unsold at end of period

manufacturing overhead

all manufacturing costs except direct materials and direct labor; i.e. indirect manufacturing costs, maintenance and reparis on production equipment, property taxes, depreciation, insurance on manufacturing facilities

period costs

costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued; i.e. sales commissions, rental costs of admin offices

product costs

all costs that are involved in acquiring or making a product; in the case of manufactured goods, they consist of direct materials, direct labor, and manufacturing overhead

schedule of cost of goods manufactured

a schedule showing the direct materials, direct labor, and manufacutring overhead costs incurred during a period and the portion of those costs that are assigned to Work in Process and Finished Goods

selling costs

all costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer; i.e. advertising, shipping, sales travel, sales commissions, sales salaries, costs of finished goods warehouses

direct materials

materials that become an integral part of a finished product and whose costs can be conveniently traced to it

prime cost

the sum of direct materials cost and direct labor cost

cost of goods sold in merchandising company

beg merchandise inventory + purchases - end merchandise inventory

cost of goods sold in manufacturing company

beg finished goods inventory + cost of goods manufactured - end finished goods inventory

variable cost

a cost that varies, in total, in direct proportion to changes in the level of activity; this cost is constant per unit

fixed cost

a cost that remains constsant, in total, regardless of changes in the level of activity within the relevant range; thsi cost varies inversely with the level of activity on a per unit basis

cost behavior

they way in which a cost reacts to change in the level of activity

common cost

a cost that is incurred to support a number of cost objects but cannot be traced to them individually; a type of indirect cost

differential cost

a difference in cost between 2 alternatives; the only cost that is relevant in a decision

differential revenue

the difference in revenue between 2 alternatives

incremental cost

an increase in cost between 2 alternatives

cost object

anything for which cost data are desired; i.e. products, customers, jobs, parts of org such as deparments/divisions

decremental cost

decrease in cost between 2 alternatives

opportunity cost

the potential benefit that is given up when one alternative is selected over another

sunk cost

a cost that has already been incurred and that cannot be changed by an decision made now or in the future; should be ignored in decision making

appraisal costs

costs that are incurred to identify defective products before the products are shipped to customers

external failure costs

costs that are incurred when a product or service that is defective is delievered to a customer

internal failure costs

costs that are incurred as a result of identifying defective products before they are shipped to customers

ISO 9000 standards

quality control requirements issued by the International Organization for Standardization that relate to products sold in European countries

prevention costs

costs that are incurred to keep defects from occurring

quality circles

small groups of employees that meet on a regular basis to discuss ways of improving quality

quality costs

costs that re incurred to prevent defective products from falling into the hands of customers or that are incurre as a result of defective units

quality cost report

a report that details prevention costs, appraisal costs, and the costsz of internal and external failures

quality of conformance

the degree to which a product or service meets or exceeds its design specifications and is free of defects or other problems that mar its appearance or degrade its performance

statistical process control

a charting technique used to monitor the quality of work being doen in a workstation for the purpose of immediately correcting any problems

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