All terms

Question 1

absorption costing

Answer 1

Stock costing method in which all
variable manufacturing costs and all fxed manufacturing
costs are included as inventoriable costs

Question 2

account analysis method

Answer 2

Approach to cost estimation
that classifes cost accounts in the ledger as variable,
fxed or mixed with respect to the cost driver. Typically,
qualitative rather than quantitative analysis is used in
making these classifcation decisions.

Question 3

activity-based accounting

Answer 3

Examination of activities
across the entire chain of value-adding organisational
processes underlying causes (drivers) of cost and proft.

Question 4

activity-based budgeting

Answer 4

Approach to budgeting that
focuses on the costs of activities necessary to produce and
sell products and services.

Question 5

activity-based costing (ABC)

Answer 5

Approach to costing that
focuses on activities as the fundamental cost objects. It uses
the cost of these activities as the basis for assigning costs to
other cost objects such as products, services or customers.

Question 6

actual costing

Answer 6

A costing method that traces direct costs
to a cost object by using the actual direct cost rate(s) times
the actual quantity of the direct cost input(s) and allocates
indirect costs based on the actual indirect cost rate(s) times
the actual quantity of the cost allocation base

Question 7

actual costs

Answer 7

Costs incurred (historical costs), as
distinguished from budgeted or forecast costs

Question 8

appraisal costs

Answer 8

Costs incurred in detecting which of the
individual units of products do not conform to
specifcation

Question 9

attention directing

Answer 9

Management accountant’s function
that involves making visible both opportunities and
problems on which managers need to focus

Question 10

autonomy

Answer 10

The degree of freedom to make decisions.

Question 11

backflush accounting

Answer 11

A cost accounting system which
focuses on the output of the organisation and then works
Glossary
backwards to allocate costs between cost of goods sold and
stock.

Question 12

backflush costing

Answer 12

Costing system that delays recording
changes in the status of a product being produced until
good fnished units appear; it then uses budgeted or
standard costs to work backwards to flush out
manufacturing costs for the units produced. Also called
delayed costing, endpoint costing or post-deduct costing.

Question 13

balanced scorecard

Answer 13

A measurement and management
system that views a business unit’s performance from four
perspectives: fnancial, customer, internal business process,
and learning and growth.

Question 14

batch-level costs

Answer 14

The costs of resources sacrifced on
activities that are related to a group of units of products or
services rather than to each individual unit of product or
service.

Question 15

belief systems

Answer 15

Levers of control that articulate the
mission, purpose, norms of behaviours and core values
of a company; intended to inspire managers and other
employees to do their best.

Question 16

benchmark

Answer 16

Point of reference from which comparisons

may be made

Question 17

benchmarking

Answer 17

The continuous process of measuring
products, services or activities against the best levels of
performance.

Question 18

book value

Answer 18

The original cost minus accumulated

depreciation of an asset.

Question 19

bottleneck

Answer 19

An operation where the work required

approaches or exceeds the available capacity

Question 20

boundary systems

Answer 20

Quantity of output where total
revenues and total costs are equal; that is where the
operating proft is zero.

Question 21

budget

Answer 21

The quantitative expression of a plan of action
and an aid to the coordination and implementation of the
plan.

Question 22

bundled product

Answer 22

A package of two or more products
or services, sold for a single price, where the individual
components of the bundle may be sold as separate items,
each with its stand-alone price.

Question 23

business function costs

Answer 23

The sum of all the costs in a

particular business function.

Question 24

business governance

Answer 24

The performance dimension of an

enterprise.

Question 25

by-product

Answer 25

Product from a joint process that has a low
sales value compared with the sales value of the main or
joint product(s).

Question 26

capitalised costs

Answer 26

Costs that are frst recorded as an asset

(capitalised) when they are incurred

Question 27

carrying costs

Answer 27

Costs that arise when a business holds

stocks of goods for sale

Question 28

cash budget

Answer 28

Schedule of expected cash receipts and

disbursements.

Question 29

cause-and-effect diagram

Answer 29

Diagram that identifes the
potential causes of failures or defects. Four major categories
of potential causes of failure are identifed human factors,
methods and design factors, machine-related factors and
materials and components factors. Also called a fshbone
diagram.

Question 30

Chartered Institute of Management Accountants

CIMA

Answer 30

The principal professional management
accounting body in the UK, founded in 1919 as the
Institute of Cost and Works Accountants. Today, in
terms of membership, it is the third largest professional
accounting body in the UK

Question 31

collusive pricing

Answer 31

Companies in an industry conspire in
their pricing and output decisions to achieve a price above
the competitive price

Question 32

combined variance analysis

Answer 32

Approach to overhead
variance analysis that combines variable-cost and fxed-cost
variances

Question 33

common cost

Answer 33

The cost of operating a facility, operation,
activity area or like cost object that is shared by two or
more users.

Question 34

complete reciprocated cost

Answer 34

The actual cost incurred by
the service department plus a part of the costs of the other
support departments that provide services to it; it is always
larger than the actual cost. Also called artifcial cost of the
service department.

Question 35

composite product unit

Answer 35

A hypothetical unit of product with

weights related to the individual products of the company.

Question 36

constant

Answer 36

The component of total costs that, within the
relevant range, does not vary with changes in the level of
the cost driver. Also called intercept

Question 37

constant gross-margin percentage NRV method

Answer 37

Joint
cost allocation method that allocates joint costs in such a
way that the overall gross-margin percentage is identical for
all the individual products.

Question 38

continuous improvement budgeted cost

Answer 38

Budgeted cost

that is successively reduced over succeeding time periods.

Question 39

contribution income statement

Answer 39

Income statement that
groups line items by cost behaviour pattern to highlight the
contribution margin.

Question 40

contribution margin

Answer 40

Revenues minus all costs of the
output (a product or service) that vary with respect to the
number of output units.

Question 41

contribution margin percentage

Answer 41

Total contribution

margin divided by revenues.

Question 42

control

Answer 42

Covers both the action that implements the
planning decision and the performance evaluation of the
personnel and operations.

Question 43

controllability

Answer 43

The degree of influence that a specifc
manager has over costs, revenues or other items in
question

Question 44

controllable cost

Answer 44

Any cost that is primarily subject to
the influence of a given manager of a given responsibility
centre for a given time span.

Question 45

conversion costs

Answer 45

All manufacturing costs other than

direct materials costs.

Question 46

cost accounting

Answer 46

Measures and reports fnancial and
other information related to the organisation’s acquisition
or consumption of resources. It provides information for
both management accounting and fnancial accounting.

Question 47

cost accumulation

Answer 47

The collection of cost data in some

organised way through an accounting system

Question 48

cost allocation

Answer 48

The assigning of indirect costs to the

chosen cost object.

Question 49

cost-allocation base

Answer 49

A factor that is the common
denominator for systematically linking an indirect cost or
group of indirect costs to a cost object.

Question 50

cost assignment

Answer 50

General term that encompasses both
tracing accumulated costs to a cost object and allocating
accumulated costs to a cost object

Question 51

cost–beneft approach

Answer 51

Primary criterion for choosing
among alternative accounting systems, which is how each
system achieves organisational goals in relation to the cost
of those systems.

Question 52

cost centre

Answer 52

A responsibility centre in which a manager is

accountable for costs only

Question 53

cost driver

Answer 53

Any factor that affects total costs. That is, a
change in the cost driver will cause a change in the level of
the total cost of a related cost object

Question 54

cost estimation

Answer 54

The measurement of past cost

relationships

Question 55

cost hierarchy

Answer 55

Categorisation of costs into different cost
pools on the basis of different classes of cost drivers or
different degrees of difculty in determining cause-andeffect (or benefts received) relationships.

Question 56

cost incurrence

Answer 56

Occurs when a resource is sacrifced or

used up

Question 57

cost leadership

Answer 57

An organisation’s ability to achieve lower
costs relative to competitors through productivity and
efciency improvements, elimination of waste and tight
cost control.

Question 58

cost management

Answer 58

Actions by managers undertaken to
satisfy customers while continuously reducing and
controlling costs.

Question 59

cost object

Answer 59

Anything for which a separate measurement

of costs is desired

Question 60

cost-plus contract

Answer 60

Contract in which reimbursement is

based on actual allowable cost plus a fxed fee

Question 61

cost pool

Answer 61

A grouping of individual cost items.

Question 62

cost smoothing

Answer 62

A costing approach that uses broad
averages to uniformly assign (spread or smooth out) the
cost of resources to cost objects (such as products, services
or customers) when the individual products, services or
customers in fact use those resources in a non-uniform way.

Question 63

cost tracing

Answer 63

The assigning of direct costs to the chosen

cost object.

Question 64

cost–volume–proft (CVP) analysis

Answer 64

Examines the
behaviour of total revenues, total costs and operating proft
as changes occur in the output level, selling price, variable
costs or fxed costs; a single revenue driver and a single cost
driver are used in this analysis.

Question 65

current cost

Answer 65

Asset measure based on the cost of
purchasing an asset today identical to the one currently
held. It is the cost of purchasing the services provided by
that asset if an identical asset cannot currently be
purchased

Question 66

customer proftability analysis

Answer 66

Examines how individual
customers, or groupings of customers, differ in their
proftability

Question 67

denominator level

Answer 67

Quantity of the allocation base used
to allocate fxed overhead costs to a cost object. Also called a production denominator level or a production
denominator volume.

Question 68

differential approach

Answer 68

Approach to decision making and
capital budgeting that analyses only those future cash
outflows and inflows that differ among alternatives.

Question 69

direct allocation method

Answer 69

Method of support cost
allocation that ignores any service rendered by one
support department to another; it allocates each support
department’s total costs directly to the operating
departments. Also called direct method

Question 70

direct costs of a cost object

Answer 70

Costs that are related to the
particular cost object and that can be traced to it in an
economically feasible way

Question 71

direct manufacturing labour costs

Answer 71

Compensation of all
manufacturing labour that is considered to be specifcally
identifed with the cost object (say, units fnished or in
process) and that can be traced to the cost object in an
economically feasible way

Question 72

direct material costs

Answer 72

The acquisition costs of all
materials that eventually become part of the cost object
(say, units fnished or in progress) and that can be traced to
that cost object in an economically feasible way

Question 73

direct materials stock

Answer 73

Direct materials in stock and

awaiting use in the manufacturing process.

Question 74

discounted cash flow (DCF)

Answer 74

Capital budgeting method
that measures the cash inflows and outflows of a project as
if they occurred at a single point in time so that they can be
compared in an appropriate way.

Question 75

discretionary costs

Answer 75

Arise from periodic (usually yearly)
decisions regarding the maximum outlay to be incurred.
They are not tied to a clear cause-and-effect relationship
between inputs and outputs.

Question 76

dual pricing

Answer 76

Approach to transfer pricing using two
separate transfer-pricing methods to price each
interdivision transaction

Question 77

dual-rate cost-allocation method

Answer 77

Allocation method
that frst classifes costs in one cost pool into two sub-pools
(typically into a variable-cost sub-pool and a fxed-cost
sub-pool). Each sub-pool has a different allocation rate or a
different allocation base

Question 78

economic order quantity (EOQ)

Answer 78

Decision model
that calculates the optimal quantity of stock to order.
Simplest model incorporates only ordering costs and
carrying costs

Question 79

economic value added (EVA®)

Answer 79

After-tax operating proft
minus the (after-tax) weighted average cost of capital
multiplied by total assets minus current liabilities.

Question 80

efficiency variance

Answer 80

The difference between the actual
quantity of input used (such as metres of materials) and
the budgeted quantity of input that should have been used,
multiplied by the budgeted price. Also called inputefciency variance or usage variance

Question 81

engineered costs

Answer 81

Costs that result specifcally from a
clear cause-and-effect relationship between costs and
outputs

Question 82

equivalent units

Answer 82

Measure of the output in terms of the
physical quantities of each of the inputs (factors of
production) that have been consumed when producing
the units. It is the physical quantities of inputs necessary
to produce output of one fully complete unit

Question 83

estimated net realisable value (NRV) method

Answer 83

Joint cost
allocation method that allocates joint costs on the basis of
the relative estimated net realisable value (expected fnal
sales value in the ordinary course of business minus the expected separable costs of production and marketing of
the total production of the period).

Question 84

expected value

Answer 84

Weighted average of the outcomes of a
decision with the probability of each outcome serving as
the weight. Also called expected monetary value.

Question 85

extended normal costing

Answer 85

A costing method that traces
direct costs to a cost object by using the budgeted directcost rate(s) times the actual quantity of the direct-cost
input and allocates indirect costs based on the budgeted
indirect-cost rate(s) times the actual quantity of the costallocation base. Also called budgeted costing

Question 86

external failure costs

Answer 86

Costs incurred when a nonconforming product is detected after it is shipped to
customers

Question 87

favourable variance

Answer 87

Variance that increases operating

proft relative to the budgeted amount. Denoted F.

Question 88

financial accounting

Answer 88

Focuses on external reporting that

is guided by generally accepted accounting principles.

Question 89

frst-in, frst-out (FIFO) process-costing

method

Answer 89

Method of process costing that assigns the cost
of the earliest equivalent units available (starting with the
equivalent units in opening work-in-progress stock) to units
completed and transferred out, and the cost of the most
recent equivalent units worked on during the period to
closing work-in-progress stock.

Question 90

flexible budget

Answer 90

A budget that is developed using
budgeted revenues or cost amounts; when variances are computed, the budgeted amounts are adjusted (flexed) to
recognise the actual level of output and the actual
quantities of the revenue and cost drivers.

Question 91

flexible-budget variance

Answer 91

Difference between the actual
result and the flexible budget amount for the actual output
achieved

Question 92

homogeneous cost pool

Answer 92

Cost pool in which all the
activities whose costs are included in the pool have the
same or a similar cause-and-effect relationship or beneftsreceived relationship between the cost allocator and the
costs of the activity.

Question 93

high–low method

Answer 93

Method used to estimate a cost
function that entails using only the highest and lowest
observed values of the cost driver within the relevant
range.

Question 94

hybrid-costing system

Answer 94

Blends of characteristics from

both job-costing systems and process-costing systems.

Question 95

incremental cost-allocation method

Answer 95

Cost-allocation
method requiring that one user be viewed as the primary
party and the second user be viewed as the incremental
party.

Question 96

incremental costs

Answer 96

Additional costs to obtain an
additional quantity over and above existing or planned
quantities of a cost object. Also called outlay costs or
out-of-pocket costs.

Question 97

indirect costs of a cost object

Answer 97

Costs that are related to
the particular cost object but cannot be traced to it in an
economically feasible way.

Question 98

indirect manufacturing costs

Answer 98

All manufacturing costs
considered to be part of the cost object (say, units fnished
or in progress) but that cannot be individually traced to
that cost object in an economically feasible way. Also called
manufacturing overhead costs and factory overhead costs.

Question 99

insourcing

Answer 99

Process of producing goods or providing
services within the frm rather than purchasing those same
goods or services from outside vendors.

Question 100

intermediate product

Answer 100

Product transferred from one
subunit to another subunit of the organisation. This
product may be processed further and sold to an external
customer.

Question 101

internal failure costs

Answer 101

Costs incurred when a nonconforming product is detected before it is shipped to
customers

Question 102

investment centre

Answer 102

A responsibility centre in which a
manager is accountable for investments, revenues and
costs.

Question 103

job-costing system

Answer 103

Costing system in which the cost of a
product or service is obtained by assigning costs to a
distinct unit, batch or lot of a product or service.

Question 104

joint cost

Answer 104

Cost of a single process that yields multiple

products simultaneously.

Question 105

joint products

Answer 105

Products from a joint process that have
relatively high sales value and are not separately identifable
as individual products until the split-off point.

Question 106

kaizen budgeting

Answer 106

Budgetary approach that explicitly
incorporates continuous improvement during the budget
period into the resultant budget numbers.

Question 107

key success factors

Answer 107

Factors that directly affect customer
satisfaction such as cost, quality, time and innovative
products and services.

Question 108

locked-in costs

Answer 108

Costs that have not yet been incurred but
that will be incurred in the future on the basis of decisions
that have already been made. Also called designed-in costs.

Question 109

main product

Answer 109

When a single process yielding two or
more products yields only one product with a relatively
high sales value, that product is termed a main product

Question 110

management accounting

Answer 110

The application of accounting
and fnancial management principles to create, protect,
preserve and increase value so as to deliver that value to
stakeholders of for-proft and not-for-proft enterprises,
both public and private (see Chapter 1 for an expanded
defnition).

Question 111

management by exception

Answer 111

The practice of
concentrating on areas that are not operating as expected
and placing less attention on areas operating as expected.

Question 112

manufacturing lead time

Answer 112

Time from when an order is
ready to start on the production line (ready to be set up) to
when it becomes a fnished good

Question 113

manufacturing overhead allocated

Answer 113

All manufacturing
costs that are assigned to a product (or service) using a cost
allocation base because they cannot be traced to a product
(or service) in an economically feasible way

Question 114

margin of safety

Answer 114

Excess of budgeted revenues over the

breakeven revenues

Question 115

master budget

Answer 115

Budget that summarises the fnancial
projections of all the organisation’s individual budgets. It
describes the fnancial plans for all value-chain functions.

Question 116

mixed cost

Answer 116

A cost that has both fxed and variable

elements. Also called a semivariable cost.

Question 117

net present-value (NPV) method

Answer 117

Discounted cash-flow
method that calculates the expected net monetary gain or
loss from a project by discounting all expected future cash
inflows and outflows to the present point in time, using the
required rate of return.

Question 118

nominal rate of return

Answer 118

Rate of return required to cover
investment risk and the anticipated decline due to inflation,
in the general purchasing power of the cash that the
investment generates

Question 119

non-linear cost function

Answer 119

Cost function in which the
graph of total costs versus a single cost driver does not
form a straight line within the relevant range

Question 120

normal costing

Answer 120

A costing method that traces direct costs
to a cost object by using the actual direct cost rate(s) times
the actual quantity of the direct cost input and allocates
indirect costs based on the budgeted indirect cost rate(s)
times the actual quantity of the cost-allocation base.

Question 121

operating leverage

Answer 121

The effects that fxed costs have on
changes in operating income as changes occur in units sold
and hence in contribution margin.

Question 122

operation costing

Answer 122

Hybrid costing system applied to
batches of similar products. Each batch of products is
often a variation of a single design and proceeds through
a sequence of selected (though not necessarily the same)
activities or operations. Within each operation all product
units use identical amounts of the operation’s resources.

Question 123

opportunity cost

Answer 123

The contribution to income that is
forgone (rejected) by not using a limited resource in its best
alternative use.

Question 124

output-unit-level costs

Answer 124

The costs of resources sacrifced
on activities performed on each individual unit of product
or service

Question 125

overallocated indirect costs

Answer 125

Allocated amount of
indirect costs in an accounting period is greater than the
actual (incurred) amount in that period. Also called
overapplied indirect costs and overabsorbed indirect costs

Question 126

padding

Answer 126

The practice of underestimating budgeted
revenues (or overestimating budgeted costs) in order to
make budgeted targets more easily achievable. Also called
budgetary slack.

Question 127

payback method

Answer 127

Capital budgeting method that
measures the time it will take to recoup, in the form of net
cash inflows, the net initial investment in a project.

Question 128

perfectly competitive market

Answer 128

Exists when there is a
homogeneous product with equivalent buying and selling
prices and no individual buyers or sellers can affect those
prices by their own actions

Question 129

physical measure method

Answer 129

Joint cost allocation method
that allocates joint costs on the basis of their relative
proportions at the split-off point, using a common physical measure such as weight or volume of the total production
of each product

Question 130

planning

Answer 130

Choosing goals, predicting results under
various ways of achieving those goals and then deciding
how to attain the desired goals.

Question 131

practical capacity

Answer 131

The denominator-level concept that
reduces theoretical capacity for unavoidable operating
interruptions such as scheduled maintenance time,
shutdowns for holidays and other days, and so on.

Question 132

predatory pricing

Answer 132

Company deliberately prices below
its costs in an effort to drive out competitors and restrict
supply and then raises prices rather than enlarge demand
or meet competition.

Question 133

price variance

Answer 133

The difference between actual price and
budgeted price multiplied by the actual quantity of input in
question. Also called input-price variance or rate variance
(especially when those variances are for direct-labour
categories)

Question 134

process-costing system

Answer 134

Costing system in which the cost
of a product or service is obtained by using broad averages
to assign costs to masses of similar units.

Question 135

product cost

Answer 135

Sum of the costs assigned to a product for a

specifc purpose

Question 136

product-cost cross-subsidisation

Answer 136

Costing outcome
where at least one miscosted product is resulting in the
miscosting of other products in the organisation.

Question 137

product-sustaining costs

Answer 137

The costs of resources
sacrifced on activities undertaken to support specifc
products or services.

Question 138

production-volume variance

Answer 138

Difference between
budgeted fxed overhead and the fxed overhead allocated.
Fixed overhead is allocated based on the budgeted fxed
overhead rate times the budgeted quantity of the fxedoverhead allocation base for the actual output units
achieved. Also called denominator-level variance and
output-level overhead variance.

Question 139

profit centre

Answer 139

A responsibility centre in which a manager

is accountable for revenues and costs.

Question 140

proration

Answer 140

The spreading of underallocated or
overallocated overhead among closing stocks and cost of
goods sold.

Question 141

reciprocal allocation method

Answer 141

Method of support-cost
allocation that explicitly includes the mutual services
rendered among all support departments

Question 142

refned costing system

Answer 142

Costing system that results
in a better measure of the non-uniformity in the use of
resources by jobs, products and customers.

Question 143

relevant costs

Answer 143

Expected future costs that differ among

alternative courses of action.

Question 144

responsibility centre

Answer 144

A part, segment or subunit of an
organisation whose manager is accountable for a specifed
set of activities

Question 145

revenue centre

Answer 145

A responsibility centre in which a

manager is accountable for revenues only.

Question 146

revenue mix

Answer 146

The relative contribution of quantities of
products or services that constitutes total revenues. See
sales mix

Question 147

reworked units

Answer 147

Unacceptable units of production that
are subsequently reworked and sold as acceptable fnished
goods.

Question 148

sales-mix variance

Answer 148

The difference between the budgeted
amount for the actual sales mix and the budgeted amount
if the budgeted sales mix had been unchanged.

Question 149

sales-quantity variance

Answer 149

The difference between the
budgeted amount based on actual quantities sold of all
products and the budgeted-mix and the amount in the
static budget (which is based on the budgeted quantities to
be sold of all products and the budgeted mix).

Question 150

sales value at split-off method

Answer 150

Joint cost allocation
method that allocates joint costs on the basis of the relative
sales value at the split-off point of the total production in
the accounting period of each product

Question 151

sales-volume variance

Answer 151

Difference between the
flexible-budget amount and the static-budget amount; unit
selling prices, unit variable costs and fxed costs are held
constant.

Question 152

scorekeeping

Answer 152

Management accountant’s function that
involves accumulating data and reporting reliable results to
all levels of management.

Question 153

scrap

Answer 153

Product that has a minimal (frequently zero) sales

value.

Question 154

selling-price variance

Answer 154

Flexible-budget variance that
pertains to revenues; arises solely from differences between
the actual selling price and the budgeted selling price.

Question 155

sensitivity analysis

Answer 155

A what-if technique that examines
how a result will change if the original predicted data are
not achieved or if an underlying assumption changes.

Question 156

separable costs

Answer 156

Costs incurred beyond the split-off point

that are assignable to one or more individual products

Question 157

single-rate cost-allocation method

Answer 157

Allocation method
that pools all costs in one cost pool and allocates them to
cost objects using the same rate per unit of the single
allocation base.

Question 158

split-off point

Answer 158

Juncture in the process when one or more
products in a joint-cost setting become separately
identifable.

Question 159

spoilage

Answer 159

Unacceptable units of production that are

discarded or sold for net disposal proceeds.

Question 160

stand-alone cost-allocation method

Answer 160

Cost allocation
method that allocates the common cost on the basis of
each user’s percentage of the total of the individual
stand-alone costs.

Question 161

standard cost

Answer 161

Carefully predetermined cost. Standard

costs can relate to units of inputs or units of outputs

Question 162

standard costing

Answer 162

Costing method that traces direct costs
to a cost object by multiplying the standard price(s) or
rate(s) times the standard inputs allowed for actual outputs
achieved and allocates indirect costs on the basis of the
standard indirect rate(s) times the standard inputs allowed
for the actual outputs achieved.

Question 163

static budget

Answer 163

Budget that is based on one level of output;
when variances are computed at the end of the period, no
adjustment is made to the budgeted amounts.

Question 164

step-down allocation method

Answer 164

Method of support cost
allocation that allows for partial recognition of services
rendered by support departments to other support
departments. Also called step or sequential allocation
method.

Question 165

stockout costs

Answer 165

Costs that result when a company runs
out of a particular item for which there is customer
demand. The company must act to meet that demand or
suffer the costs of not meeting it.

Question 166

suboptimal decision making

Answer 166

Decisions in which the
beneft to one subunit is more than offset by the costs or
loss of benefts to the organisation as a whole. Also called
incongruent decision making

Question 167

sunk costs

Answer 167

Past costs that are unavoidable because they

cannot be changed no matter what action is taken.

Question 168

support department

Answer 168

A department that provides the
services that maintain other internal departments
(operating departments and other support departments)
in the organisation. Also called a service department

Question 169

theoretical capacity

Answer 169

The denominator-level concept that
is based on the constant production of output at maximum
efciency.

Question 170

total direct manufacturing labour mix variance

Answer 170

The
difference between (a) the budgeted cost for the actual
direct manufacturing labour input mix and (b) the
budgeted cost if the budgeted direct labour input mix had
been unchanged, for the actual total quantity of all direct
manufacturing labour used.

Question 171

total direct manufacturing labour yield variance

Answer 171

The
difference between (a) the budgeted cost of direct
manufacturing labour based on actual total quantity of all
direct manufacturing labour used and (b) the flexible
budget cost of direct manufacturing labour based on the
budgeted total quantity of direct manufacturing labour
inputs for the actual output achieved, given that the
budgeted labour input mix is unchanged.

Question 172

total direct materials mix variance

Answer 172

The difference
between (a) the budgeted cost for the actual direct materials
input mix and (b) the budgeted cost if the budgeted direct
materials input mix had been unchanged, for the actual
total quantity of all direct material inputs used.

Question 173

total direct materials yield variance

Answer 173

The difference
between (a) the budgeted cost of direct materials based on
actual total quantity of all direct materials inputs used and
(b) the flexible-budget cost of direct materials based on the
budgeted total quantity of direct materials inputs for the
actual output achieved, given that the budgeted materials
input mix is unchanged.

Question 174

transfer price

Answer 174

Price that one subunit (segment,
department, division, etc.) of an organisation charges for a
product or service supplied to another subunit of the same
organisation.

Question 175

transferred-in costs

Answer 175

Costs incurred in a previous
department that are carried forward as part of the
product’s cost as it moves to a subsequent department for
processing. Also called previous department costs

Question 176

underallocated indirect costs

Answer 176

Allocated amount of
indirect costs in an accounting period is less than the
actual (incurred) amount in that period. Also called
underapplied indirect (overhead) costs or underabsorbed
indirect costs

Question 177

unfavourable variance

Answer 177

Variance that decreases operating

proft relative to the budgeted amount. Denoted U.

Question 178

value-added cost

Answer 178

A cost that, if eliminated, would
reduce the value customers obtain from using the product
or service.

Question 179

variable-overhead efciency variance

Answer 179

g.
variable-overhead efciency variance The difference
between the actual and budgeted quantity of the variableoverhead cost-allocation base allowed, for the actual output
units achieved, times the budgeted variable overhead cost
allocation rate

Question 180

variable-overhead spending variance

Answer 180

The difference
between the actual amount of variable overhead incurred
and the budgeted amount allowed for the actual quantity
of the variable-overhead allocation base used, for the actual
output units achieved.

Question 181

weighted-average process-costing method

Answer 181

Method of
process costing that assigns the average equivalent unit cost
of all work done to date (regardless of when it was done)
to equivalent units completed and transferred out and to
equivalent units in closing stock.

Question 182

work-in-progress stock

Answer 182

Goods partially worked on but

not yet fully completed. Also called work in process.