CH 3 vocab

Question 1

Define allocation basis

Answer 1

Same as cost driver

Question 2

Define Allocation rate

Answer 2

The cost pool divided by the allocation volume

Question 3

Define Capacity costs

Answer 3

The sum of variable and fixed overhead costs

Question 4

Define Cost allocation

Answer 4

A procedure that distributes a common cost among the items giving rise to the cost

Question 5

Define Cost driver

Answer 5

Attributes that we can measure for each cost object that distribute the cost pool among cost objects

Question 6

Define Cost of goods manufactured (COGM)

Answer 6

The cost of items finished and transferred from work in process inventory to finished goods inventory

Question 7

Define Cost of good sold (COGS)

Answer 7

The cost of products sold in a period. THe cost of items transferred from finished goods inventory to the income statement.

Question 8

Define Cost objects

Answer 8

The items, or entities, to which cost are to be allocated

Question 9

Define Cost pool

Answer 9

The total costs to be allocated

Question 10

Define Denominator volume

Answer 10

Same as allocation volume

Question 11

Define Direct labor

Answer 11

Labor cost that can be traced to individual untis of a product in a cost effective manner

Question 12

Define Direct materials

Answer 12

Materials costs than can be traced economically to individual units of a product

Question 13

Define Fixed overhead

Answer 13

Indirect manufacturing costs that do not vary with production volume

Question 14

Define Gross margin

Answer 14

Revenues less product costs

Question 15

Define Inventoriable costs

Answer 15

same as Product costs

Question 16

Define Manufacturing firms

Answer 16

A firm that uses labor and equipment to transform inputs such as material and components into outputs.

Question 17

Define Manufacturing overhead

Answer 17

The sum of all indirect manufacturing costs

Question 18

Define Merchandising firm

Answer 18

A firm that resells essentially the same product it buys from suppliers

Question 19

Define Overhead

Answer 19

same as Manufacturing overhead

Question 20

Define Overhead rate

Answer 20

A term frequently used to refer to allocation rate

Question 21

Define Period Costs

Answer 21

A financial accounting concept under GAAP. ANy cost that is not product cost. A cost related to the selling of goods and the administration of the organization

Question 22

Define Selling and administration costs

Answer 22

Nonmanufacturing costs. A term frequently used to refer to period costs.

Question 23

Define Service firm

Answer 23

A firm whose product is neither tangible nor storable

Question 24

Define Total manufacturing cost charged to production

Answer 24

The sum of materials, labor, and overhead added to the work in process account during the period

Question 25

Define Variable overhead

Answer 25

Indirect manufacturing cost that vary with production volume.