Chapter 2 Flashcards
Costs required to manage the organization and provide staff support, including executive salaries, costs of data processing, and legal costs
Administrative Costs
Sales price minus Variable cost per unit`
Contribution Margin
Sum of direct labor and manufacturing overhead
Conversion Costs
Sacrifice of resources
Cost
Process of assigning indirect costs to products, services, people, business units, etc.
Cost Allocation
Method used to assign costs in the cost pool to the cost objects
Cost Allocation Rule
Diagram or flowchart illustrating the cost allocation process
Cost Flow Diagram
Any end to which a cost is assigned
Cost Object
Expense assigned to products sold during a period
Cost of Goods Sold
Collection of costs to be assigned to the cost objects
Cost Pool
Any cost that can be directly (unambiguously) related to a cost object
Direct Cost
Work that actually transforms materials into finished products during the production process
Direct Labor
Product costs that can be feasibly identified with units of production
Direct Manufacturing Costs
Those materials that can feasibly be identified directly with the product
Direct Materials
Cost that is charged against revenue in an accounting period
Expense
Product fully completed, bunt not yet sold
Finished Goods
Costs that are unchanged as volume changes within the relevant range of activity
Fixed Costs
All variable and fixed manufacturing costs; used to cote product’s inventory value under GAAP
Full Absorption Cost
Sum of all costs of manufacturing and selling a unit or product (includes both variable and fixed costs)
Full Cost
Revenue minus cost of goods sold on income statements. Per unit, the blank equals Sales price minus full absorption cost per unit
Gross Margin
Any cost that cannot be directly related to a cost object
Indirect Cost
All product costs except direct costs
Indirect Manufacturing Costs
Costs added to inventory accounts
Inventoriable Costs
All production costs except direct labor and direct materials
Manufacturing Overhead
Costs required to obtain customer orders and provide customers with finished products, including advertising, sales, commissions, and shipping costs
Marketing Costs
Excess of operating revenue over the operating costs necessary to generate those revenues
Operating Profit
Forgone benefit from the best foregone alternative course of action
Opportunity Cost
Past, present, or future cash outflow
Outlay Cost
Costs recognized for financial reporting when incurred
Period Costs
Sum of all direct materials and direct labor
Prime Costs
Costs assigned to the manufacturing of products and recognized for financial reporting when sold
Product Costs
Activity levels within which a cost estimate is valid; the range within which a given fixed of unit variable cost will be unchanged even though the volume changes
Relevant Range
Cost that has both fixed and variable components
Semi-variable/Mixed Cost
Cost that increase with volume in steps
Step/Semifixed Cost
Costs that change in direct proportion with a change in volume within the relevant range of activity
Variable Costs
Product in the production process but not yet complete
Work in Process
