Relevant Cost
relevant cost - Items where future costs and revenues are expected to differ for the alternative decisions under consideration
2 min read
cost accounting
Cost Accounting
Replacement
replacement - A restoration of an asset, at least partially, to its original condition; such costs may be capitalized by reducing accumulated depreciation
2 min read
cost accounting
accounting fundamentals
Residual Income
residual income - An internal assessment technique that adjusts income for a presumed cost of capital (or other threshold rate of return); operating income -...
2 min read
financial reporting
cost accounting
+1
Resource
resource - The elements consumed by activities and cost objects
2 min read
cost accounting
Resource Driver
resource driver - The concept that activities create the need for resources which will be consumed in the production process
2 min read
cost accounting
Retail Inventory Method
retail inventory method - An inventory costing technique used by retailers that extrapolates inventory values by applying cost-to-retail percentages to known...
2 min read
cost accounting
Scattergraph
scattergraph - A simplistic mapping of observed data points, where a line is "visually" drawn to represent the estimated cost function
2 min read
cost accounting
Sg&a
SG&A - Selling, general, and administrative costs; the period costs of the business
2 min read
cost accounting
Sg&a Budget
SG&A budget - A budget that details anticipated selling, general, and administrative costs
2 min read
cost accounting
financial planning
Six Sigma
Six Sigma - A trademarked quality management system developed by Motorola; driven by pursuit of statistical results that reflect near perfection in productio...
2 min read
cost accounting
Specific Identification Method
specific identification method - Inventory costing method where the actual cost of each unit of merchandise is tracked and used for accounting purposes
2 min read
cost accounting
Standard Cost
standard cost - A measure of what costs should be incurred to achieve the observed output
2 min read
cost accounting
Step Cost
step cost - A cost function that is fixed over a range, and then increases by a measured step to a new level at the next higher increment of activity
2 min read
cost accounting
Step Method/Allocating Service Cost
step method/allocating service cost - An allocation process whereby some service department costs may be assigned to other service departments as part of a s...
2 min read
cost accounting
Traceable Fixed Costs
traceable fixed costs - Fixed costs that would not exist if the unit under evaluation ceased to exist
2 min read
cost accounting
Underapplied Overhead
underapplied overhead - Applied overhead is less than the actual amount; usually viewed as a unfavorable outcome, because more has spent than anticipated for...
2 min read
cost accounting
Unit-level Activity
unit-level activity - Activities that relate to the number of units of output; each additional unit of production requires another activity
2 min read
cost accounting
Variable Cost
variable cost - A per unit cost that is the same regardless of volume; total variable cost increases with volume increases
2 min read
cost accounting
Variable Costing
variable costing - A costing method where inventory absorbs direct costs and variable factory overhead; the income statement identifies the contribution margin
2 min read
financial reporting
cost accounting
Variable Overhead Efficiency Variance
variable overhead efficiency variance - A variance that reflects the level of efficiency associated with the application of variable overhead to production
2 min read
cost accounting
Variable Overhead Spending Variance
variable overhead spending variance - A variance that reflects the difference between actual variable overhead and standard variable overhead associated with...
2 min read
cost accounting
Warranty Liability
warranty liability - A liability that is recorded for the future costs of claims that are anticipated because of product warranty agreements
2 min read
cost accounting
accounting fundamentals
Weighted-average Inventory Method
weighted-average inventory method - Under the periodic inventory system; inventory cost is based on the average cost of units purchased giving consideration ...
2 min read
cost accounting
Weighted-average Process Costing
weighted-average process costing - A process costing technique where all units of production are assigned the same cost; determined by blending of current pe...
2 min read
cost accounting
Work in Process
work in process - Goods that are in production but not yet complete; an accumulation of monies spent on direct material, direct labor, and applied manufactur...
2 min read
cost accounting
Manufacturing Overhead
manufacturing overhead - All costs of manufacturing other than direct materials and direct labor (also called factory overhead)
2 min read
cost accounting
Master Budget
master budget - Also known as the comprehensive budget; an integrated set of articulated budgets relating to numerous operational subcomponents (labor, mater...
2 min read
cost accounting
financial planning
Materials Requisition Form
materials requisition form - Form showing what material has been removed from the raw materials stock and put into production
2 min read
cost accounting
Method of Least Squares
method of least squares - A complex means for separating costs into fixed and variable components, based upon minimizing the variances between all observatio...
2 min read
cost accounting
Mixed Costs
mixed costs - A cost that has both fixed and variable components
2 min read
cost accounting
Modified Accelerated Cost Recovery System
Modified Accelerated Cost Recovery System - A "depreciation" approach common to the tax code; generally permits more rapid "recovery" of asset cost than GAAP...
2 min read
cost accounting
accounting fundamentals
+1
Moving-average Method
moving-average method - Under the perpetual inventory system; to recompute running average cost with each purchase transaction
2 min read
cost accounting
Multiple-step Income Statement
multiple-step income statement - A complex income statement with sections that segregate cost of goods sold calculations and other components of income and e...
2 min read
financial reporting
cost accounting
Net Realizable Value (Nrv)
net realizable value (NRV) - (inventory) Estimated selling price in the normal course of business, less reasonably predictable costs of completion, disposal,...
2 min read
cost accounting
Operating Expenses
operating expenses - General expense category for selling and administrative costs
2 min read
cost accounting
Opportunity Cost
opportunity cost - The cost of a foregone alternative; may include lost revenue
2 min read
cost accounting
Overapplied Overhead
overapplied overhead - Applied overhead exceeds the actual amount; usually viewed as a favorable outcome, because less has spent than anticipated for the lev...
2 min read
cost accounting
Overhead Application Rate
overhead application rate - A rate used to apply manufacturing overhead to output; estimated factory overhead for a period divided by the estimated applicati...
2 min read
cost accounting
Period Cost
period cost - A cost not attributable to the acquisition or manufacture of inventory; expensed as incurred
2 min read
cost accounting
Prime Cost
prime cost - Product costs that are direct in nature; direct materials and direct labor
2 min read
cost accounting
Process Costing
process costing - Process costing is a method to allocate the total costs of production to homogenous units produced via a continuous process that usually in...
2 min read
cost accounting
Process Costing Methods
process costing methods - A product costing method particularly well suited to situations where production occurs in a continuous process; costs are pooled a...
2 min read
cost accounting
Product Cost
product cost - Costs that attach to a product; the summation of direct materials, direct labor, and factory overhead
2 min read
cost accounting
Production Budget
production budget - A budget that details planned levels of production; takes into account sales and inventory build/decline
2 min read
cost accounting
financial planning
Profit Center
profit center - Business unit that has control over both costs and revenues and is therefore evaluated on the profit outcomes
2 min read
cost accounting
Property, Plant, and Equipment
property, plant, and equipment - Assets with long lives that will be used in an entity's production processes; land, buildings, and equipment
2 min read
cost accounting
accounting fundamentals
Defined Benefit Plan
defined benefit plan - A type of pension plan where the benefits are a function of years of service, pay, and age; the ultimate employer cost is not known in...
2 min read
cost accounting
Depletion
depletion - The process used to allocate the cost of a natural resource asset to the accounting periods benefited
2 min read
cost accounting
accounting fundamentals
Depreciable Base
depreciable base - Cost minus salvage value; the amount of cost that will be allocated to the service life
2 min read
cost accounting
Depreciation
depreciation - The process used to allocate the cost of a long-lived property to the accounting periods benefited
2 min read
cost accounting
Direct Costs
direct costs - A cost easily traced to a specific job; generally direct material and direct labor
2 min read
cost accounting
Direct Labor Budget
direct labor budget - A budget that details expected direct labor needs, along with the related costs of labor
2 min read
cost accounting
financial planning
Direct Material
direct material - The costs of all materials that are an integral part of a finished product and that have a physical presence that is readily traced to that...
2 min read
cost accounting
Direct Method/Allocating Service Cost
direct method/allocating service cost - An allocation process whereby service department costs are assigned directly to productive departments (compare to st...
2 min read
cost accounting
Discretionary Fixed Cost
discretionary fixed cost - Fixed cost resulting from yearly spending decisions; proper planning can result in avoidance of these costs as necessary (e.g., ad...
2 min read
cost accounting
financial planning
Expenses
expenses - The costs incurred in producing revenues
2 min read
cost accounting
Factory Overhead Budget
factory overhead budget - A budget that details the anticipated factory overhead, including calculations related to the allocation of such amounts
2 min read
cost accounting
financial planning
Finished Goods
finished goods - Finished goods represent the cost of completed products awaiting sale to a customer
2 min read
cost accounting
First-in, First-out
first-in, first-out - FIFO; An inventory cost flow assumption based on the notion that the earliest costs are to be assigned to units sold
2 min read
cost accounting
Fixed Cost
fixed cost - A total cost that is the same regardless of volume; total cost is constant and per unit cost decreases with volume increases
2 min read
cost accounting
Fixed Overhead Spending Variance
fixed overhead spending variance - A fixed overhead variance that compares actual fixed overhead to the budgeted fixed overhead
2 min read
cost accounting
financial planning
Fixed Overhead Volume Variance
fixed overhead volume variance - A fixed overhead variance that compares the budgeted fixed overhead to the fixed overhead that is applied to production base...
2 min read
cost accounting
financial planning
Gross Profit
gross profit - A calculated amount corresponding to net sales minus cost of goods sold
2 min read
cost accounting
Gross Profit Method
gross profit method - A technique that purports to estimate inventory and cost of goods sold by applying historic percentage relationships to observable sale...
2 min read
cost accounting
Held-to-maturity Investments
held-to-maturity investments - Investments purchased with intent to hold to maturity; usually investment in debt; accounted for by amortized cost method
2 min read
cost accounting
High-low Method
high-low method - A simple means for separating costs into fixed and variable components, based upon the difference between costs at the highest and lowest o...
2 min read
cost accounting
Historical Cost Principle
historical cost principle - The concept that many transactions and events are to be measured and reported at acquisition cost
2 min read
cost accounting
Indirect Costs
indirect costs - A cost not easily traced to a specific job; generally categorized as factory or manufacturing overhead
2 min read
cost accounting
Inventoriable Cost
inventoriable cost - Product costs that attach to inventory
2 min read
cost accounting
Investment Center
investment center - A evaluative unit where managers are accountable for cost and profit outcomes, including consideration of the amount of capital that is d...
2 min read
cost accounting
Job Cost Sheet
job cost sheet - A document representing a compilation of cost data for a specific job
2 min read
cost accounting
Job Costing Method
job costing method - A costing approach whereby actual labor and material is tracked for each job or product
2 min read
cost accounting
Just in Time Inventory
just in time inventory - Raw materials are received from supplies just as they are needed in the production process
2 min read
cost accounting
Land Improvements
land improvements - Includes the cost of parking lots, sidewalks, landscaping, irrigation systems, and similar expenditures that are incurred to better land
2 min read
cost accounting
Last-in, First-out Method
last-in, first-out method - LIFO; An inventory cost flow assumption based on the notion that the most recent costs are to be assigned to units sold
2 min read
cost accounting
Lower of Cost or Net Realizable Value
lower of cost or net realizable value - To report inventory at the lower of its cost or net realizable value
2 min read
cost accounting
Contribution Income Statement
contribution income statement - An internal report that identifies each segment's controllable elements; the contribution margin, controllable fixed costs, u...
2 min read
cost accounting
Contribution Margin
contribution margin - Revenues minus all variable expenses, whether related to production or selling and administration (not to be confused with gross profit)
2 min read
cost accounting
Controller
controller - The primary person responsible for the cost and managerial accounting functions
2 min read
cost accounting
Conversion Cost
conversion cost - Cost components needed to change raw materials to finished goods, specifically direct labor and manufacturing overhead
2 min read
cost accounting
Cost Accounting
cost accounting - The process by which an organization's cost is collected, assigned, and interpreted
2 min read
cost accounting
Cost Center
cost center - An area of responsibility under the control of a manager who is responsible for costs incurred within the unit; the unit generally has little r...
2 min read
cost accounting
Cost Driver
cost driver - The factor that is viewed as causing costs to be incurred within an organization
2 min read
cost accounting
Cost Flow Assumption
cost flow assumption - An assumption about how costs are assigned to inventory in the accounting records
2 min read
cost accounting
Cost Object
cost object - The output for which costing information is to be determined under ABC; can be product or service related, or customer, market, etc.
2 min read
cost accounting
Cost of Goods Manufactured
cost of goods manufactured - The amount of cost attributable to goods reaching the end of production; beginning work in process (wip) + (direct materials, di...
2 min read
cost accounting
Cost of Goods Sold
cost of goods sold - The total cost attributed to units of inventory actually sold during a period
2 min read
cost accounting
Cost of Production Report
cost of production report - A report used in a process costing environment to tabulate the costs incurred within a particular stage/department
2 min read
cost accounting
Cost-volume-profit Analysis
cost-volume-profit analysis - (CVP) Analysis focusing on the interplay of pricing, volume, variable and fixed costs, and product mix
2 min read
cost accounting
Capital Expenditures
capital expenditures - Ordinary and necessary costs incurred to place an item of property, plant, or equipment in its condition for intended use; such amount...
2 min read
cost accounting
accounting fundamentals
Committed Fixed Cost
committed fixed cost - Costs that arise from an organization's commitment to engage in operations; unavoidable elements like depreciation, rent, insurance, p...
2 min read
cost accounting
taxation
Common Fixed Costs
common fixed costs - Fixed costs that are incurred to support more than one business unit
2 min read
cost accounting
ABC/Activity Based Costing
ABC/activity based costing - Alternative costing method for strategic management; divides production into activities, defines costs for activities, and alloc...
2 min read
cost accounting
Absorption Costing
absorption costing - Also known as full costing -- a costing method where inventory absorbs direct costs and variable and fixed factory overhead
2 min read
cost accounting
Activity Cost Pool
activity cost pool - The costs assigned to a particular activity
2 min read
cost accounting
Activity-based Costing
activity-based costing - (ABC) A costing system for situations where overhead is high and/or a variety of products are produced; costs are traced to activiti...
2 min read
cost accounting
Amortization
amortization - The process used to allocate the cost of an intangible asset to the accounting periods benefited
2 min read
cost accounting
accounting fundamentals
Amortized Cost Method
amortized cost method - The approach mandated for held-to-maturity securities; investments are reported at their cost with any premium or discount amortized ...
2 min read
cost accounting
Batch-level Activity
batch-level activity - Activities that relate to each batch of production; independent of the number of units within that batch
2 min read
cost accounting
Betterment
betterment - Expenditures that improve or increase the service potential of an asset even beyond its original new condition; such costs may be capitalized by...
2 min read
cost accounting
accounting fundamentals
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