chapter 2 definitions Flashcards
cost of goods manufactured
total cost of WIP less cost of ending WIP inventory
Cost of goods purchased
the net cost of merchandise purchased (after deducting purchase returns, purchase allowances and purchase discounts) plus the cost of freight in
Direct labour
the work of factory employees that can be physically and directly associated with converting raw materials into finished goods
ending WIP inventory
units that were partially completed at the end of the accounting period
Fixed costs
costs that remain the same in total regardless of changes in the activity level
high low method
a mathematical method to separate mixed costs into their variable and fixed components that uses the total costs incurred a the high and low levels of activity
MOH
manufacturing costs that are indirectly associated with the manufacture of the finished product
Period costs
costs that are matched with the revenue of a specific time period and charged to expenses as incurred
Prime Costs
sum of direct material costs and direct labour costs
Product costs
costs that are a necessary and integral part of producing the finished product (dir mat, dir lab, MOH)
Relevant range
the range of the activity index over which the company expects to operate during the year
Total cost of WIP
beg WIP + Dir mat, Dir Lab and MOH
Total Manufacturing Cost
Dire mat, dir lab and MOH
variable costs
costs that vary in total directly and proportionately with changes in the activity level
Activity index
the activity that causes changes in the behaviour of costs
