 | Term | Definition |
| |
controlling |
implementing plans and evaluating the results of business operations by comparing the actual results to the budget |
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cost/benefit analysis |
weighing costs against benefits to help make decisions |
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cost object |
anything for which managers want a separate measurement of cost |
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cost of goods manufactured |
the manufacturing of plant-related costs of the goods that finished the production process this period |
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direct cost |
a cost that can be traced to a cost object |
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direct labor |
the compensation of employees who physically convert materials into finished products |
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direct materials |
materials that become a physical part of a finished product and whose costs are traceable to the finished product |
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enterprise resource planning (ERP) |
software systems that can integrate all of a company's worldwide functions, departments, and data into a single system |
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factory overhead |
all manufacturing costs other than direct materials and direct labor. also called MANUFACTURING OVERHEAD or INDIRECT MANUFACTURING COSTS |
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finished goods inventory |
completed goods that have not yet been sold |
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indirect cost |
a cost that cannot be traced to a cost object |
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indirect labor |
labor costs that are difficult to trace to specific products |
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indirect manufacturing cost |
all manufacturing costs other than direct materials and direct labor. also called FACTORY OVERHEAD or MANUFACTURING OVERHEAD |
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indirect materials |
materials whose costs cannot conveniently be directly traced to particular finised products |
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inventoriable product costs |
all costs of a product that GAAP requires companies to treat as an asset for external financial reporting. these costs re not expensed until the product is sold |
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Just - In - Time (JIT) |
a system in which a company produces just in time to satisfy needs. suppliers deliver materials just in time to begin production and finished units are completed just in time for delivery to the customer |
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management accountability |
the managers fiduciary responsibility to manage the resources of an organization |
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management accounting |
the branch of accounting that focuses on information for internal decision makers of a business |
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manufacturing company |
a comapny that uses labor, plant, and equipment to convert raw materials into new finished products |
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manufacturing overhead |
all manufacturing costs other than direct materials and direct labor. also called FACTORY OVERHEAD or INDIRECT MANUFACTURING COSTS |
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materials inventory |
raw materials for use in manufacturing |
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merchandising company |
a comapany that resells products previously bought from suppliers |
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period costs |
operating costs that are expensed in the period in which they are incurred |
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planning |
choosing goals and deciding how to acheive them |
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service company |
a company that sells intangible services, rather than tangible products |
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total manufacturing costs |
costs that include direct materials, direct labor, manufacturing overhead |
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total quality management (TQM) |
a philosophy of delighting customers by providing them with superior products and services. requires inproving quality and eliminating defects and waste throughout the value chain |
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work in process inventory |
goods that are partway through the manufacturing procces but not yet complete |
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allocation base |
a common denominator that links indirect costs to cost objects. ideally, the allocation base is the primary cost driver of the indirect costs |
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cost allocation |
assigning indirect costs (such as manufacturing overhead) to costs objects (such as jobs or production processes) |
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cost driver |
the primary factor that causes a cost |
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cost tracing |
assigning direct costs (such as direct materials and direct labor) to cost objects (such as jobs or production processes) that used those costs |
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job cost record |
document that accumulates the direct materials, direct labor, and manufacturing overhead costs assigned to an individual job |
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job order costing |
a system that accumulates costs for each job. law firms, music studios, health-care, providers, mail-order catalog companies, building contractors, and custom furniture manufacturers are examples of companies that use job order costing systems |
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labor time record |
identifies the employee, the amount of time spent on a particular job, and the labor cost charged to the job; a record used to assign direct labor costs to specific jobs |
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materials requisition |
request for the transfer of materials to the production floor, prepared by the production team |
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overallocated manufacturing overhead |
the manufacturing overhead allocated to Work in Progress Inventory is more than the amount of manufacturing overhead costs actually incurred |
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predetermined manufacturing overhead rate |
estimated manufacturing overhead cost per unit of the allocation base, computed at the beginning of the the year |
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process costing |
system for assigning costs to large numbers of identical units that usually proceed in a continuous fashion through a series of uniform productions steps or processes |
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time record |
source document used to track direct labor to specific jobs |
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underallocated (manufacturing) overhead |
the manufacturing overhead allocated to work in prgress inventory is less than the amount of manufacturing overhead costs actually incurred |
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conversion costs |
direct labor plus manufacturing overhead |
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equivalent units |
express the amount of work done during a period in terms of fully complete units of output |
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production cost report |
summarize a processing department's operations for a period |
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transferred-in costs |
costs incurred in a previous process that are carried forward as a part of the product's cost when it moves to the next process |
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weighted-average process costing method |
a process costing method that costs all equivalent units of work with a weighted average of the previous priod's and the current period's cost per equivalent unit |
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activity-based costing (ABC) |
focuses on activities as the fundamental cost objets. the costs of those activities become building blocks for compiling the indirect costs or products, services, and customers |
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activity-based management (ABM) |
using activity-based cost information to make decisions that increase profits while satisfying customers needs |
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appraisal costs |
costs incurred to detect poor-quality goods or services |
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backflush costing |
a stnadard costing system that starts with output completed and then assigns manufacturing costs to units sold and to inventories. also called JUST-IN-TIME COSTING |
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external failure costs |
costs incurred when the company does not detect poor-quality goods or services until after delivery to customers |
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internal failure costs |
costs incurred when the company detects and corrects poor-quality goods or services before delivery to customers |
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just-in-time (JIT) costing |
a standard costing system that starts with output completed and then assigns manufacturing costs to units sold and to inventories. also called BACKFLUSH COSTING |
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prevention costs |
costs incurred to avoid poor-quality goods or services |
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target cost |
allowable cost to develop, produce, and deliver the product or service. equals target price minus desired profit |
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target price |
what customers are willing to pay for the product or service |
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value engineering |
reevaluating activities to reduce costs while satisfying customer needs |
