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41 terms

Accounting Exam 2

AC 222
STUDY
PLAY
activity
an event or process that consumes overhead resources
activity cost pool
overhead resources-line items of cost-consumed by the activity
activity measure
allocation base or cost driver used to measure the use of an activity
transaction driver
how many times an activity is performed; number of purchase orders
duration driver
time required to perform an activity; a higher level measure than a simple transaction driver; machine set up hours
activity levels
levels of the cost driver- reflect the way in which the cost driver occurs
unit level activity
done every time one unit of product is made; DL
batch level activity
done once for a bunch of units; set up copy machine once specify color, staple left, and make 200 copies
product level activity
carried out for entire product line, regardless of how many batches of product you'll make, or how many units any one batch will contain; food recipe
customer level activity
done for a customer as opposed to for the product the customer buys; sales calls
organization sustaining activity
supports production, supports long term decision not affect by short term fluctuations in products or volumes
activity based management
study activities, their costs, and how products use them. discover ways to improve production processes, remove non-value adding steps and costs, and increase efficiency and capacity w/o increasing costs
green costs
will be automatically eliminated if the product is eliminated
yellow cost
can be eliminated but it will require a management decision-won't automatically happen
red cost
difficult and often costly to remove and can seriously impair other aspects of the business if care if not taken in reducing these costs
absorption costing
charges all manufacturing overhead, fixed and variable, to units of product(full costing)
job order costing
way of organizing work in process, that that each batch of product is distinguished from other batches of the same product, or other products
process costing
homogenous product, continuous production, keeps track of WIP by department instead of job; unit product cost- total Manufacturing cost during pd./total units completed
decentralized organization
decision-making is spread throughout the different levels of management
responsibility center
part of an organization whose manager has control over cost, profits, and/or investments
cost center
manager control costs but not any revenues or invested funds
profit center
manager controls costs and revenues but not invested funds
investment center
control over costs, profits, and invested funds
segment
any part of the company about which management wants cost, revenue or profit data
balanced scorecard
Supports the company's strategy: a plan for achieving goals, Performance measures that employees can understand and carry out; emphasis not on meeting goals but on improvement
transfer price
needed when one segment of a company provides goods or services to another segment of the same company and both managers have profit responsibility
suboptimization
occurs when managers do not act in the best interest of the company although they may be benefiting their own segment
idle capacity
no opportunity cost b/c enough capacity exists to product the transferred units w/o any effect on sales to outside customers
no idle capacity
units can only be produced if some outside sales are foregone
relevant cost
a future cost that will differ b/w the alternatives
differential cost
differs b/w alternatives
incremental cost
additional cost of one unit
opportunity cost
benefit forgone when one alternative is selected over another
sunk cost
past cost already incurred that is never relevant to a decision
avoidable cost
can be eliminated by choosing one of the alternatives
value chain
all activities needed to develop, produce, sell and service a product
vertical integration
company carries out several activities in its value chain in "house"
make or buy
should a company carry out an activity itself or purchase from outside the company
joint products
two or more products that are produced from a common input
split off point
where you complete processing the single input and have to decide whether to make end products and how many(where joint products can be recognized as individual products)
joint costs
costs that are incurred up to the split-off point