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39 terms

Managerial Accounting - Chapter 2

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activity
A measure of an organization's output of goods or services.
average cost per unit
The total cost of producing a particular quantity of product divided by the number of units produced.
controllable cost
A cost that is subject to the control or substantial influence of a particular individual.
conversion costs
Direct-labor cost plus manufacturing-overhead cost.
cost
The sacrifice made, usually measured by the resources given up, to achieve a particular purpose.
cost driver
A characteristic of an activity or event that results in the incurrence of costs by that activity or event.
cost objects
Responsibility centers, products, or services to which costs are assigned.
cost of goods manufactured
The total cost of direct material, direct labor, and manufacturing overhead transferred from Work-in- Process Inventory to Finished-Goods Inventory during an accounting period.
cost of goods sold
The expense measured by the cost of the finished goods sold during a period of time.
differential cost
The difference in a cost item under two decision alternatives.
direct cost
A cost that can be traced to a particular department or other subunit of an organization.
direct-labor cost
The cost of salaries, wages, and fringe benefits for personnel who work directly on the manufactured products.
direct material
Raw material that is physically incorporated in the finished product.
expense
The consumption of assets for the purpose of generating revenue.
finished goods
Completed products awaiting sale.
fixed cost
A cost that does not change in total as activity changes.
idle time
Unproductive time spent by employees due to factors beyond their control, such as power outages and machine breakdowns.
incremental cost
The increase in cost from one alternative to another.
indirect cost
A cost that cannot be traced to a particular department.
indirect labor
All costs of compensating employees who do not work directly on the firm's product but who are necessary for production to occur.
indirect materials
Materials that either are required for the production process to occur but do not become an integral part of the finished product, or are consumed in production but are insignificant in cost.
inventoriable cost
Cost incurred to purchase or manufacture goods. Also see product cost.
manufacturing overhead
All manufacturing costs other than direct-material and direct-labor costs.
marginal cost
The extra cost incurred in producing one additional unit of output.
mass customization
A manufacturing environment in which many standardized components are combined to produce custom-made products to customer order.
operating expenses
The costs incurred to produce and sell services, such as transportation, repair, financial, or medical services.
opportunity cost
The potential benefit given up when the choice of one action precludes selection of a different action.
out-of-pocket costs
Costs incurred that require the expenditure of cash or other assets.
overtime premium
The extra compensation paid to an employee who works beyond the normal period of time.
period costs
Costs that are expensed during the time period in which they are incurred.
prime costs
The costs of direct material and direct labor.
product cost
Cost associated with goods for sale until the time period during which the products are sold, at which time the costs become expenses. See also inventoriable cost.
raw material
Material entered into a manufacturing process.
schedule of cost of goods manufactured
A detailed schedule showing the manufacturing costs incurred during an accounting period and the change in work-in-process inventory.
schedule of cost of goods sold
A detailed schedule showing the cost of goods sold and the change in finished-goods inventory during an accounting period.
service (or support) departments
Subunits in an organization that are not involved directly in producing the organization's output of goods or services.
sunk costs
Costs that were incurred in the past and cannot be altered by any current or future decision.
variable cost
A cost that changes in total in direct proportion to a change in an organization's activity.
work in process
Partially completed products that are not yet ready for sale.