Chapter 14 Definitions

Front 1

1. Continuous improvement

Back 1

concepts requiring every manager and employee continually to look to improve operations.

Front 2

2. Control

Back 2

process of monitoring planning decision and evaluating the organizations activities and employees.

Front 3

3. Controllable or not controllable cost (controllable)

Back 3

costs that a manager has the power to control or at least strongly influence. (noncontrollable)-

Front 4

4. Conversion costs

Back 4

expenditures incurred in converting raw materials to finished goods; includes direct labor costs and overhead costs.

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5. Cost object

Back 5

product, process, department, or customer to which costs are assigned.

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6. Customer orientation

Back 6

company position that its managers and employees be in tune with the changing wants and needs of consumers.

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7. Cycle efficiency (CE)

Back 7

a measure of product efficiency, which is defined as value added (process) time divided by total cycle time.

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8. Cycle time (CT)

Back 8

a measure of the time to produce a product or service which is the sumer of process time, inspection time, move time, and wait time, also called throughput time.

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9. Direct costs

Back 9

costs incurred for the benefit of one specific cost object.

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10. Direct labor

Back 10

efforts of employees who physically convert materials to finished product.

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11. Direct labor costs

Back 11

wages and salaries for direct labor that are separately and readily traced through the production process to finishd goods.

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12. Direct material

Back 12

raw material that physically becomes part of the product and is clearly identified with specific pro ducts or batches of product.

Front 13

13. Direct material costs

Back 13

expenditures for direct material that are separately and readily traced through the production process to finished goods.

Front 14

14. Ethics

Back 14

codes of conduct by which actions are judged as right or wrong, fair or unfair, honest or dishonest.

Front 15

15. Factory overhead

Back 15

factory activites supporting the production process that are not direct material or direct labor; also called overhead and manufacturing overhead.

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16. Factory overhead costs

Back 16

expenditures for factory overhead that cannot be separately or readily traced to finished goods; also called overhead costs.

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17. Finished goods inventory

Back 17

account that controls the finished goods files, which acts as a subsidiary ledger ( of the inventory account) in which the costs of finished goods that are ready for sale are recorded.

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18. Fixed cost

Back 18

cost that does not change with changes in the volume of activity.

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19. Goods in process inventory

Back 19

account in wich costs are accumulated for products that are in the process of being produced but are not yet complete, aslo called work in process inventory.

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20. Indirect costs

Back 20

costs incurred for the benefit of more than one cost object.

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21. Indirect labor

Back 21

efforts of production employees who do not work specifically on converting direct materials into finished products and who are not clearly identified with specific units or batches of product.

Front 22

22. Indirect labor costs

Back 22

labor costs that cannot be physically traced to production of a product or service, included as part of overhead.

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23. Indirect material

Back 23

material used to support the production process but not clearly identified with products or batches of product.

Front 24

24. Institute of management accountants (IMA)

Back 24

a professional association of management accountants.

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25. Internal control system

Back 25

all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

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26. Just in time (JIT) manufacturing

Back 26

process of acquiring or producing inventory only when needed.

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27. Lean business model

Back 27

practice of eliminating waste while meeting customer needs and yielding positive company returns.

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28. Managerial accounting

Back 28

area of accounting aimed mainly at serving the decision making needs of internal users; also called management accounting.

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29. Manufacturing statement

Back 29

report that summarized the types and amounts of costs incurred in a company’s production process for a period; also called cost of goods manufacturing statement.

Front 30

30. Non value added time

Back 30

the portion of cycle time that is not directed at producting a product or service; equals the sum of inspection time, move time, and wait time.

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31. Opportunity cost

Back 31

potential benefit lost by choosing a specific action from two or more alternatives.

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32. Out of pocket cost

Back 32

cost incurred or avoided as a result of management’s decision.

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33. Period costs

Back 33

expenditures identified more with a time period than with finished products costs; includes selling and general administrative expenses.

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34. Planning

Back 34

process of setting goals and preparing to achiveve them.

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35. Prime costs

Back 35

expenditures directly identified with the production of finished goods; include direct materials costs and direct labor costs.

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36. Product costs

Back 36

costs that are capitalized as inventory because they produce benefits expected to have future value; include direct materials, direct labor, and overhead.

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37. Raw materials inventory

Back 37

goods a company acquires to use in making products.

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38. Sunk cost

Back 38

cost already incurred and cannot be avoided or changed.

Front 39

39. Total quality management (TQM)

Back 39

concept calling for all managers and employees at all stages of operations to strive toward higher standards and reduce number of defects.

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40. Value added time

Back 40

the portion of cycle time that is directed at producing a product or service; equals process time.

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41. Value chain

Back 41

sequential activites that add value to an entity’s products or services, includes design, production, marketing, distribution, and service.

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42. Variable cost

Back 42

cost that changes in proportion to changes in the activity output volume.