College Accounting-Chapter 3

30 terms by SHendrickson 

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Review of the terms from Chapter 3.

Variable Cost

A cost that changes in direct proportion to the change in activity.

Fixed Cost

A cost that does not change in total as the amount of activity changes

Mixed Cost

A cost that varies, but not proportionately, to a change in activity.

Purchase Order

A document sent from a buyer to a vendor to request items for purchase.

Sales Invoice

A document sent from a seller to a customer as a bill.

Purchase Requisition

A document used by an internal party to communicate their needs to the purchasing manager.

Cells

A group of machines arranged to reduce travel time of product between machines.

Expenditure Process

A series of interrelated activities designed to enable the company to generate revenue.

Revenue Process

A series of interrelated activities designed to generate revenue.

Conversion Process

A series of interrelated activities designed to produce the goods a company sells.

Machine Set Ups

Adjustments made to machines in preparation for new production run.

Activity Driver

Basis that reflects the consumption or provision of resources.

Direct Labor

Cost of salaries for workers who actually manufacture the product.

Purchase Discounts

Discount given buyer for paying amount due early (buyer's perspective).

Sales Allowances

Discounts given to unhappy customers by seller (seller's books).

Sales Discounts

Discounts offered to customers to induce them to pay early (seller's perspective).

Purchase Returns

Goods returned by buyer on buyer's books.

Sales Returns

Goods returned to the seller by the buyer (seller's perspective).

Cost Behavior

How a cost reacts to change in the level of operating activity.

Revenue Behavior

How revenue reacts to a change in the level of operating activity.

FOB Destination

Legal title transfers to customer when goods are received.

FOB Shipping Point

Legal title transfers when goods leave the seller's place of business.

Manufacturing Overhead

Manufacturing cost not directly associated with the production of a product.

Purchase Allowances

Reduction in price of goods purchased as a result of dissatisfaction by customers (buyer's perspective).

Variable Revenue

Revenue that changes in direct proportion to the change in activity.

Mixed Revenue

Revenue that changes, but not proportionately, to a change in activity.

Fixed Revenue

Revenue that does not change in total as activity changes.

Bill of Lading

Shipping document that describes agreement between business and common carrier.

Relevant Range

The span of operating activity that is considered normal for a company.

Direct Material

Wood used to make furniture.

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