Cost Accounting

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Cost Pool

Back 1

a grouping of individual cost items.

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Cost-allocation Base

Back 2

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

Back 3

the assigning of indirect costs to the chosen cost object.

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Cost tracing

Back 4

the assigning of direct costs to the chosen cost object.

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Responsibility Center

Back 5

subunits of an organization whose managers are accountable for specific activities.

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Job-costing System

Back 6

Each job uses a different amount of resources and costs need to be allocated differently through them.

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Process-costing system

Back 7

identical units being sold in masses. Homogeneous.

Front 8

source document

Back 8

original record that supports journal entries.

Front 9

Job Cost Record

Back 9

Records and accumulates all the costs assigned to a specific job.

Front 10

Materials-requisition record

Back 10

information about the cost of direct materials used on a specific job and department.

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The numerator reason

Back 11

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

Back 12

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

Back 13

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

Back 14

gives rise to normal costing.

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Actual Costing

Back 15

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

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Overhead Control > Overhead Allocated

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Overallocated Overhead

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Overhead Control < Overhead Allocated

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Adjusted Allocation Rate Approach

Back 18

all allocationsare recalculated with the actual, exact allocation rate.

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Proration Approach

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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

Back 20

The difference is simply written off to COGS.

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Manufacturing overhead allocated

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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

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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

Back 23

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

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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

Back 25

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)

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Refines costing systems by identifying individual activities as the fundamental cost objects.

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Direct-cost tracing

Back 27

reclassify some indirect costs as direct costs.

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Cost Hierarchy

Back 28

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

Back 29

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

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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

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(Design Costs). Vary to the complexity of the product being made.

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Facility-sustaining costs

Back 32

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

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uses activity based costing information to improve customer satisfaction and profitability.

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Budget

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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

Back 35

building blocks leading tothe creation of the Budgeted Income statement.

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Financial Budget

Back 36

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

Back 37

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

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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

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Factory Floor. Things that are making the costs.

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Revenue Center

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Sales Department.

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Profit Center

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Grocery Store. Coordinate different product mixes.

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Investment Center

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Regional Manager. Identifying different opportunities to build new stores.

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Budget variance

Back 43

actual result deviation from budgeted amounts.