Key Terms II

Question 1

Activity Base

Answer 1

A measure of whatever causes the incurrence of a variable cost.

Question 2

Administrative Costs

Answer 2

All executive, organisational and clerical costs associated with the general management of an organisation rather than the manufacturing, marketing or selling

Question 3

Common Cost

Answer 3

A cost that is common to a number of costing objects but cannot be traced to them individually.

Question 4

Conversion Cost

Answer 4

Direct labour cost plus manufacturing overhead cost

Question 5

Cost Behaviour

Answer 5

The way in which a cost reacts or responds to changes in the level of business activity

Question 6

Cost Driver

Answer 6

A factor, such as machine hours, beds occupied, computer time, or flight hours, that causes overhead costs

Question 7

Cost Object

Answer 7

Anything for which costs data is desired. E.g. products, product lines, customers, etc

Question 8

Cost of Goods Manufactured

Answer 8

The manufacturing costs associated with the goods that were finished during the period

Question 9

Differential Cost

Answer 9

A difference in costs between any two alternatives

Question 10

Differential Revenue

Answer 10

The different in revenue between any two alternatives

Question 11

Direct Cost

Answer 11

A cost that can easily and conveniently be traced to the particular cost object under consideration

Question 12

Direct Labour

Answer 12

Those factory labour costs that can easily be traced to individual units of product

Question 13

Direct Materials

Answer 13

Those materials that become an integral part of a finished product and can conveniently be traced into it

Question 14

Expense

Answer 14

The cost incurred when a resource/asset is consumed or sold for the purpose of generating revenue

Question 15

Finished Goods

Answer 15

Goods that have been completed but not yet sold to customers

Question 16

Fixed Cost

Answer 16

A cost that remains constant, regardless of changes in the level of activity within the relevant range

Question 17

Incremental Cost

Answer 17

An increase in cost between two alternatives

Question 18

Indirect Cost

Answer 18

A cost that cannot be easily and conveniently be traced to the particular cost object under consideration

Question 19

Indirect Labour

Answer 19

The labour costs of caretakers, supervisors, materials handlers, and other factory workers that cannot conveniently be traced directly to particular products

Question 20

Indirect Materials

Answer 20

Small items of material, such as glue and nails. These items become an integral part of a finished product but are traceable to the product only at great cost or inconvenience

Question 21

Inventoriable Costs

Answer 21

Synonym of product costs

Question 22

Manufacturing Overhead

Answer 22

All costs associated with manufacturing except direct materials and direct labour

Question 23

Marketing or Selling Costs

Answer 23

All costs necessary to secure customer orders and get the finished product or service into the hands of the customer

Question 24

Opportunity Cost

Answer 24

The potential benefit that is given up when one alternative is selected over another

Question 25

Period Cost

Answer 25

Those costs that are taken directly to the profit and loss account as expenses in the period in which they are incurred or accrued; such costs consist of selling and administrative expenses

Question 26

Prime Cost

Answer 26

Direct materials cost plus direct labour cost

Question 27

Product Costs

Answer 27

All costs that are involved in the purchase or manufacture of goods. in the case of manufactured goods, these costs consist of direct materials, direct labour and manufacturing overheads

Question 28

Raw Materials

Answer 28

Any materials that go into the final product

Question 29

Relevant Range

Answer 29

The range of activity within which the assumptions about variable and fixed cost behaviour are valid

Question 30

Schedule of Cost of Goods Manufactured

Answer 30

A schedule showing the direct materials, direct labour and manufacturing overhead costs incurred for a period and assigned to work in progress and completed goods

Question 31

Sunk Cost

Answer 31

Any cost that has already been incurred and that cannot be changed by any decision made now or in the future

Question 32

Variable Cost

Answer 32

A cost that varies in direct proportion to changes in the level of activity. It is constant per unit

Question 33

Work in Progress

Answer 33

Goods that are only partially complete and will require further work before they are ready for sale