Managerial Accounting Chapter 2 Key Terms
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Created by:
AccountingAlly on January 20, 2009
Subjects:
managerial accounting, accounting
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40 terms
Terms | Definitions |
|---|---|
 Administrative costs | All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling. |
| Appraisal costs | Costs that are incurred to identify defective products before the products are shipped to customers. |
| Common cost | A cost that is incurred to support a number of cost objects but 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. |
| 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, jobs, and parts of the organization such as departments or divisions. |
| Cost of goods manufactured | The manufacturing costs associated with the goods that were finished during the period. |
| Differential cost | A difference in cost between two alternatives. Also see Incremental cost. |
| Differential revenue | The difference in revenue between two alternatives. |
| Direct cost | A cost that can be easily and conveniently traced to a specified cost object. |
| Direct labor | Factory labor costs that can be easily traced to individual units of product. 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. |
| External failure costs | Costs that are incurred when a product or service that is defective is delivered to a customer. |
| Finished goods | Units of 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. Also see Differential cost. |
| Indirect cost | A cost that cannot be easily and conveniently traced to a specified cost object. |
| Indirect labor | The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be 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. |
| 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. |
| Manufacturing overhead | All manufacturing costs except direct materials and direct labor. |
| Opportunity cost | The potential benefit that is given up when one alternative is selected over another. |
| Period costs | Costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued. |
| Prime cost | Direct materials cost plus direct labor cost. |
| Prevention costs | Costs that are incurred to keep defects from occurring. |
| Product costs | All costs that are 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. |
| Quality circles | Small groups of employees that meet on a regular basis to discuss ways of improving quality. |
| Quality cost report | A report that details prevention costs, appraisal costs, and the costs of internal and external failures. |
| Quality cost | Costs that are incurred to prevent defective products from falling into the hands of customers or that are incurred as a result of defective units. |
| 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. |
| Raw materials | Any materials that go into the final product. |
| Relevant range | The range of activity within which assumptions about variable and fixed cost behavior are valid. |
| Schedule of cost of goods manufactured | A schedule showing the direct materials, direct labor, and manufacturing 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. |
| Statistical process control | A charting technique used to monitor the quality of work being done in a workstation for the purpose of immediately correcting any problems. |
| Sunk cost | A cost that has already been incurred and 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 | Units of product that are only partially complete. |
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