| Term | Definition |
|---|
| Activity-based costing (ABC) | A two-stage costing method in which overhead costs are applied to products on the basis of the activities they require. |
| Activity-based management | A management approach that focuses on managing activities as a way of eliminating waste and reducing delays and defects. |
| Activity cost pool | A "bucket" in which costs are accumulated that relate to a single activity measure in an activity-based costing system. |
| Activity measure | An allocation base in an activity-based costing system; ideally, a measure of whatever causes the costs in an activity cost pool. |
| Activity rate | A predetermined overhead rate in activity-based costing. Each activity cost pool has its own activity rate which is used to apply overhead to products and services. |
| Batch-level activities | Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in a batch. The amount of resources consumed depends on the number of batches run rather than on the number of units in the batch. |
| Benchmarking | A systematic approach to identifying the activities with the greatest room for improvement. It is based on comparing the performance in an organization with the performance of other, similar organizations known for their outstanding performance. |
| Facility-level activities | Activities that relate to the overall costs of maintaining and managing productive capacity and that can't be traced to specific products. |
| Product-level activities | Activities that relate to specific products that must be carried out reguardless of how many units are produced and sold or batches run. |
| Unit-level activities | Activities that arise as a result of the total volume of goods and services that are produced, and that are performed each time a unit is produced. |
| Activity | An event that causes the consumption of overhead resources. |
| Absorption costing or Full Cost | A costing method that includes all manufacturing costs-direct materials, direct labor, and both variable and fixed manufacturing overhead-in the cost of a product. |
| Allocation base | A measure of activity such as direct labor-hours or machine-hours that is used to assign costs to cost objects. |
| Bill of materials | A document that shows the type and quantity of each major item of materials required to make a product. |
| Cost driver | A factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs. |
| Job cost sheet | A form prepared for each job that records the materials, labor, and manufacturing overhead costs charged to the job. |
| Job-order costing system | A costing system used in situations where many different products, jobs, or services are produced each period. |
| Materials requisition form | A detailed source document that specifies the type and quantity of materials drawn from the storeroom and that identifies the job that is changed for the cost of those materials. |
| Multiple predetermined overhead rates | A costing system with multiple overhead cost pools with a different predetermined rate for each cost pool, rather than a single predetermined overhead rate for the entire company. Frequently, each production department is treated as a separate overhead cost pool. |
| Normal cost system | A costing system in which overhead costs are applied to jobs by multiplying a predetermined overhead rate by the actual amount of the job allocation base incurred by the job. |
| Overapplied overhead | A credit balance in the Manufacturing Overhead account that occurs when the amount of overhead cost applied to Work in Process is greater than the amount of overhead cost actually incurred during a period. |
| Overhead application | The process of charging manufacturing overhead cost to job cost sheets and to the Work in Process account. |
| Plantwide overhead rate | A single predetermined overhead rate that is used throughout a plant. |
| Predetermined overhead rate | A rate used to charge overhead cost to jobs; the rate is established in advance for each period using estimates of total manufacturing overhead cost and of the total amount of the allocation base for the period. |
| Process costing system | A costing system used in situations where a single, homogeneous product (such as cement or flour) is produced for long periods of time. |
| Time ticket | A detailed source document that is used to record the amount of time an employee spends on various activities during a day. |
| Underapplied overhead | A debit balance in the Manufacturing Overhead account that arises when the amount of overhead cost actually incurred is greater than the amount of overhead cost applied to Work in Process during a period. |
Combine with other sets
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