Cost Chapter 7

17 terms by auburnap17

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by products

a secondary product recovered in the course of manufacturing a primary product during a joint process

casual factors

activities or variables that invoke service costs. generally, it is desirable to use casual factors as the basis for allocating service costs

common cost

the cost of a resource used in the output of two or more services or products

constant gross margin percentage method

a joint cost allocation method that maintains the same gross margin percentage for each product

direct method

a method that allocates service costs directly to producing departments. This method ignores any interactions that may exist among service departments.

hypothetical sales value

an approximation of the sales value of a joint product at split off. It is found by subtracting all separable or further processing costs from the eventual market value

joint product

two or more products, having relatively substantial value, that are produced simultaneously by the process up to a split off point

net realizable value method

a method of allocating joint production costs to the joint products based on their proportionate share of eventual revenue less further processing costs

physical units method

a method of allocating join production costs based on each product's share of total units

producing departments

a unit within an organization responsible for producing the products or services that are sold to customers.

reciprocal method

a method that simultaneously allocates service costs to all user departments. It gives full consideration to interactions among service departments

sales value at split off method

a method of allocating joint production costs based on each product's share of revenue realized at the split off point.

separable costs

Costs that are easily traced to individual products and offer no particular problem

sequential or step method

a method that allocates service costs to user departments in a sequential manner. It gives partial consideration to interactions among service departments.

split off point

the point at which the joint products become separate and identifiable

support departments

a unit within an organization that provides essential support services for producing departments

weight factor

a value used to assign weights to various joint products in accordance with their relative size, difficulty to produce and such

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