ACCTG 404 Exam 1 Flashcards
Activity base
measure of whatever causes a variable cost to be incurred
total cost of surgical gloves in a hospital will increase as the number of surgeries increase, number of surgeries is the activity base
direct labor hours or machine hours
Administrative Costs
all executive, organizational, clerical cost associated with general operation
office supplies, utilities
Committed Fixed Costs
Investments in facilities, equipment, basic organizational structure that are long term
investments that you are committed to long term
Common Cost
cost incurred to support a number of cost objects that cannot be traced individually
rent for a building that contains multiple departments
Contribution Approach
costs are separated into variable and fixed categories, used to assess profitability of different business segments
Contribution Margin
amount remaining from sales revenue after all variable expenses have been deducted
selling price - variable costs
conversion cost
direct labor plus manufacturing overhead cost
costs incurred to convert raw materials into finished products
cost behavior
way in which a cost reacts to changes in the level of activity (variable costs)
cost object
anything for which cost data is desired
usually entails DM, DL, MOH
cost structure
relative proportion of fixed, variable, and mixed costs incurred
differential cost
a future cost that differs between any two alternatives
company deciding between two methods
same as incremental cost
direct cost
a cost easily traced to a specified cost object
direct labor
factory labor costs easily traced to a specific product
wages for factory line workers
direct materials
materials that become an integral part of a finished product and costs are easily traced
discretionary fixed costs
fixed cost that arise from annual decisions by management to spend on certain fixed cost items
financial accounting
reports historical financial information to external parties
finished goods
units of product that have been completed but not yet sold
fixed cost
cost remains constant
indirect cost
cost cannot easily be traced to a cost object
indirect labor
labor costs of workers that cannot easily be traced to particular products
indirect materials
small items of material such as glue and nails that may be integral part of a finished product, not easily traced
inventoriable (product) costs
costs associated with getting a product ready for sale
DM, DL, MOH, expensed as COGS
managerial accounting
provides information to managers for use within the organization
manufacturing overhead
all manufacturing costs except direct materials and direct labor
includes indirect costs
mixed cost
cost with variable and fixed cost elements
opportunity cost
potential benefit given up when one alternative is selected over another
period costs
costs taken directly to the income statement as expenses in period incurred
selling and administrative expenses
prime costs
direct materials plus direct labor
raw materials
any materials going into the final product
relevant benefit
benefit that will be directly affected by a specific decision, important in decision making process
relevant range
range of activity within which assumptions about variable and fixed cost behavior
selling costs
all costs incurred to secure customer orders
sales commission, advertising expense
sunk costs
cost already incurred that cannot be changed by any decision made now or in future
variable cost
cost that varies in direct proportion to changes in activity level
work in process
partially complete units of product requiring further work before they are ready for sale to the customer
absorption costing
costing method that includes all manufacturing costs (direct materials, direct labor, manufacturing overhead) in unit product costs
allocation base
measure of activity used to assign costs to cost objecct
bill of materials
document showing quantity of each type of direct material required to make a product
estimate of what it takes to build 1 unit of an object
cost driver
a factor that causes overhead costs
cost-plus pricing
a predetermined markup is applied to a cost base to determine target selling price
100 * 1.5 = selling price of 150
job cost sheet
form that records direct materials, direct labor, moh charged to a job
job order costing
assigns costs to specific jobs that have unique items
used when each project is unique, like construction
specific DL, DM, MOH
materials requisition form
document specifying the type and quantity of materials to be drawn from the storeroom and the job charged for the cost of those materials
multiple predetermined overhead rates
costing system with multiple overhead cost pools and a different predetermined overhead rate for each cost pool
normal cost system
costing system that applies overhead costs to jobs by multiplying a predetermined overhead rate by the actual amount of allocation base incurred by the job
overhead application
process of assigning overhead cost to specific jobs
plantwide overhead rate
single predetermined overhead rate used throughout a plant
predetermined overhead rate
rate used to charge manufacturing overhead cost to jobs that is established in advance of each period
cost of goods manufactured
manufacturing costs associated with units off product completed during period
finished goods
unit of product completed but not yet sold to customers
overapplied overhead
credit balance in MOH that occurs when overhead cost in WIP is greater than overhead cost actually incurred
overhead application
process of assigning overhead cost to specific jobs
schedule of goods manufactured
schedule that contains direct materials, direct labor, and MOH
schedule of cost of goods sold
schedule containing product costs
underapplied overhead
debit balance in MOH occuring when overhead cost in WIP is less than overhead actually incurred
conversion costs
direct labor cost plus MOH cost
equivalent units
product of the number of partially completed units and their percentage of completion with respect to a particular cost
Equivalent Units of Production (Weighted Average Method)
units transferred to next department (or to finished goods) during period plus equivalent units in departments ending WIP inventory
averages cost of beginning inventory and new production in a period
Operation Costing
hybrid costing system used when products have common characteristics and some individual characteristics
hybrid of job order costing and process costing
Process Costing
used when identical products are produced on a continual basis
Processing Department
work is performed on a product and where materials, labor, and MOH cost are added to product
Weighted Average Method
calculates unit cost by combining costs and outputs from current and prior periods
Key Performance Indicator
percentage of production capacity used (EFFICIENCY)
more units in system = more money
roll forward analysis
tracks changes in an account from one period to the next by rolling forward balance
