Chapter 21 Flashcards
Cost allocation method that focuses on activities performed; traces costs to activities and then assigns them to cost objects.
Activity-based costing (ABC)
Temporary account that accumulates costs a company incurs to support an activity.
Activity cost pool
Costs that a manager has the power to control or at least strongly influence.
Controllable costs
Department that incurs costs but generates no revenues; common example is the accounting or legal department.
Cost center
Variable that causes an activity’s cost to go up or down; a causal factor.
Activity cost driver
Amount by which a department’s revenues exceed its direct expenses.
Departmental contribution to overhead
Expenses traced to a specific department (object) that are incurred for the sole benefit of that department.
Direct expenses
Expenses incurred for the joint benefit of more than one department (or cost object).
Indirect expenses
Center of which a manager is responsible for revenues, costs, and asset investments.
Investment center
Cost incurred to produce or purchase two or more products at the same time.
Joint cost
Business unit that incurs costs and generates revenues.
Profit center
System that provides information that management can use to evaluate the performance of a department’s manager.
Responsibility accounting
Costs that a manager does not have the power to determine or strongly influence.
Uncontrollable costs
