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43 Cards in this Set
- Front
- Back
Cost Pool |
a grouping of individual cost items. |
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Cost-allocation Base |
a factor that links in a systematic way an indirect cost or group ofindirect costs to a cost object. |
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Cost allocation |
the assigning of indirect costs to the chosen cost object. |
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Cost tracing |
the assigning of direct costs to the chosen cost object. |
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Responsibility Center |
subunits of an organization whose managers are accountable for specific activities. |
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Job-costing System |
Each job uses a different amount of resources and costs need to be allocated differently through them. |
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Process-costing system |
identical units being sold in masses. Homogeneous. |
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source document |
original record that supports journal entries. |
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Job Cost Record |
Records and accumulates all the costs assigned to a specific job. |
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Materials-requisition record |
information about the cost of direct materials used on a specific job and department. |
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The numerator reason |
The shorter the period, the greater the influence of seasonal patterns on the amount of costs. The indirect cost-pool will differ from the actual and the budgeted. |
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The denominator reason |
The need to spread monthly fixed indirect costs over fluctuating levels of monthly output. The allocation-base will differ between the actual rate and the budgeted rate. |
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Normal Costing |
Indirect costs based on the budgeted indirect-cost rate(s) x the actual activity consumption. less accurate, but allows for real-time job costing |
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Budgeted indirect cost rate |
gives rise to normal costing. |
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Actual Costing |
Indirect costs based on the actual indirect-cost rate(s) x the actual activity consumption ? more accurate, but must wait until end of fiscal period to do |
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Underallocated Overhead |
Overhead Control > Overhead Allocated |
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Overallocated Overhead |
Overhead Control < Overhead Allocated |
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Adjusted Allocation Rate Approach |
all allocationsare recalculated with the actual, exact allocation rate. |
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Proration Approach |
the difference is allocatedbetween Cost of Goods Sold, Work-in-Process, and Finished Goods based on their relative sizes -- subsidiary ledgers (individual job cost records) are not updated. |
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Write-Off Approach |
The difference is simply written off to COGS. |
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Manufacturing overhead allocated |
The amount to individual jobs based on the budgeted rate multiplied by actual quantity used of the allocation base. |
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Over Costing |
a product consumes a low levelof resources. The physical reality--but is allocated high costs per unit. Has too much OHcost allocated to it, making it seem less profitable than it really is |
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Under Costing |
a product consumes a highlevel of resources. The physical reality--but is allocated low costs per unit. too little OHcost allocated to it, making it seem more profitable than it really is. |
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Product-cost cross -subsidization |
If a company undercosts one of its products, than it will overcost at least one of its other products. |
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Refined costing system |
Reduces the use of broad averages for assigning the cost of resources to cost objects. Provides better measurement of the costs of indirect resources used by different cost objects. |
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Activity-Based Costing System (ABC) |
Refines costing systems by identifying individual activities as the fundamental cost objects. |
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Direct-cost tracing |
reclassify some indirect costs as direct costs. |
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Cost Hierarchy |
Categorizing indirect costs into different cost pools on the basis of the different types of cost drivers, or allocation bases, or cause-and-effect relationships. |
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Output unit-level costs |
costs of activities performed on each individual unit of product or service. indirect costs thatwould be avoided if additional units were not produced (energy-costs). |
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Batch-level costs |
costs of activities related to a group of units or products or services rather than to each individual unit of product or service. (Set-up costs) As more batches are being made, set-up hours and cost will increase. |
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Product-sustaining costs |
(Design Costs). Vary to the complexity of the product being made. |
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Facility-sustaining costs |
Costs of activities that cannot be traced to individual products or services but support the organization as a whole. (Management Salaries, Building security). |
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Activity-based managment |
uses activity based costing information to improve customer satisfaction and profitability. |
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Budget |
The quantitative expression of a proposed plan of action by management for a specified period, and. An aid to coordinating what needs to be done to implement that plan. May include both financial and nonfinancial data |
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Operating Budget |
building blocks leading tothe creation of the Budgeted Income statement. |
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Financial Budget |
building blocks based onthe Operating Budget that lead to the creation of the Budgeted Balance Sheet and the Budgeted Statement of Cash Flows. |
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Controllability |
the degree of influence that amanager has over costs, revenues, or related items for which he is being held responsible. |
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Budgetary Slack |
The practice of underestimating budgetedrevenues, or overestimating budgeted expenses, in an effort to make the resulting budgeted goals (profits) more easily attainable. |
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Cost Center |
Factory Floor. Things that are making the costs. |
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Revenue Center |
Sales Department. |
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Profit Center |
Grocery Store. Coordinate different product mixes. |
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Investment Center |
Regional Manager. Identifying different opportunities to build new stores. |
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Budget variance |
actual result deviation from budgeted amounts. |