ch2 vocab Flashcards
allocate
to assign an indirect cost to a cost object
assign
to attach a cost to a cost object
average cost
the total cost divided by the number of units
biomimicry
a means of product design in which a company tries to mimic, or copy, the natural biological process in which dead organisms become the input for another organism or process
controllable costs
costs that can be influenced or changed by management
conversion costs
the combination of direct labor and manufacturing overhead costs
cost object
anything for which managers want a separate measurement of costs
cost of goods manufactured
the cost of manufacturing the goods that were finished during the period
customer service
support provided for customers after the sale
design
detailed engineering of products and services and the processes for producing them
differential cost
the difference in cost between two alternative courses of action
direct cost
a cost that can be traced to a cost object
direct labor
the cost of compensating employees who physically convert raw materials into the company’s product; labor costs that are directly traceable to the finished product
direct materials
primary raw materials that become a physical part of a finished product and whose costs are traceable to the finished product
distribution
delivery of products or services to customers
finished goods inventory
completed goods that have not yet been sold
fixed costs
costs that stay constant in total despite wide changes in volume
greenwashing
the unfortunate practice of overstating a company’s commitment to sustainability
indirect costs
a cost that relates to the cost object but cannot be traced to it
indirect labor
labor costs that are difficult to trace to specific products
indirect materials
materials whose costs are difficult to trace to specific products
inventoriable product costs
all costs of a product that GAAP requires companies to treat as an asset for external financial reporting. These costs are not expensed until the product is sold
life cycle assessment
a method of product design in which the company analyzes the environmental impact of a product, from cradle grave, in an attempt to minimize negative environmental consequences throughout the entire life span of the product
manufacturing company
a company that uses labor, plant, and equipment to convert raw materials into new finished products
manufacturing overhead
all manufacturing costs other than direct materials and direct labor; also called factory overhead and indirect manufacturing costs
marginal cost
the cost of producing one or more unit
marketing
promotion and advertising of products or services
merchandising company
a company that resells tangible products previously bought from suppliers
other indirect manufacturing costs
all manufacturing overhead costs aside from indirect materials and indirect labor
period costs
costs that are expensed in the period in which they are incurred; operating expenses, selling, general, and administrative expenses
perpetual inventory
an inventory in which both Cost of Goods Sold and Inventory are updated every time a sale is made
periodic inventory
an inventory system in which Cost of Goods Sold is calculated at the end of the period, rather than every time a sale is made
prime costs
the combination of direct material and direct labor costs
production or purchases
resources used to produce a product or service, or to purchase finished merchandise intended for resale
raw materials inventory
all raw materials not yet used in manufacturing
research and development
researching and developing new or improved products or services or the processes for producing them
retailer
merchandising company that sells to consumers
service company
a company that sells intangible services rather than tangible products
sunk cost
a cost that has already been incurred
total costs
the cost of all resources used throughout the value chain
trace
to assign a direct cost to a cost object
triple bottom line
evaluating a company’s performance not only by its ability to generate economic profits, but also by its impact on people and the planet
uncontrollable costs
costs that cannot be changed or influenced in the short run by management
value chain
the activities that add value to a firm’s products and services; R&D, design, production or purchase, marketing, distribution, and customer service
variable costs
costs that change in total in direct proportion to changes in volume
wholesaler
merchandising companies that buy in bulk from manufacturers, mark up the prices, and then sell those products to retailers
work in progress invenory
goods that are partway through the manufacturing process but not yet complete
