Cost Accounting Chapter 2

Front 1

Cost

Back 1

Sacrifice of resources

Front 2

Expense

Back 2

Cost that is charged against revenue in an accounting period

Front 3

Outlay Cost

Back 3

Past, present or future cash outflow

Front 4

Opportunity Cost

Back 4

Forgone benefit fro the best (forgone) alternative course of action/ forgone benefit that could have been realized from the best forgone alternative use of a resource

Front 5

Operating Profit

Back 5

excess of operating revenues over operating costs necessary to generate those revenues

Front 6

cost of goods sold

Back 6

expense assigned to products sold during a period/only actual costs of the goods that were sold, not costs required to sell them

Front 7

product costs

Back 7

costs assigned to the manufacture of products and recognized for financial reporting when sold

Front 8

period costs

Back 8

costs recognized for reporting when incurred

Front 9

2 types of product costs

Back 9

1. direct manufacturing costs
2. indirect manufacturing costs

Front 10

direct manufacturing costs

Back 10

product costs that can be feasibly identified with units of production

Front 11

indirect manufacturing costs

Back 11

all product costs except direct costs

Front 12

direct materials

Back 12

materials that can be identified directly with the product at reasonable cost

Front 13

direct labor

Back 13

labor that can be identified directly with the product at reasonable cost

Front 14

manufacturing overhead

Back 14

all production costs except those for direct labor and direct materials

Front 15

indirect labor

Back 15

cost of workers not directly related to product but necessary to produce product such as supervisors, maintenance workers and inventory storekeepers

Front 16

indirect materials

Back 16

materials not part of finished product but necessary to produce it

Front 17

other manufacturing costs

Back 17

expenses incurred to keep the factory operating

Front 18

prime costs

Back 18

sum of direct materials and direct labor

Front 19

conversion costs

Back 19

sum of direct labor and manufacturing overhead

Front 20

marketing costs

Back 20

costs required to obtain customer orders and provide customers with finished products, including advertising, sales commissions, and shipping costs

Front 21

administrative costs

Back 21

costs required to manage the organization and provide staff support, including executive salaries, costs of data processing, and legal costs

Front 22

cost allocation

Back 22

process of assigning indirect costs to products, services, people, business units, etc

Front 23

Cost object

Back 23

any end to which a cost is assigned

Front 24

cost pool

Back 24

collection of costs to be assigned to the cost objects

Front 25

cost allocation rule

Back 25

method used to assign costs in the cost pool to the cost objects

Front 26

cost flow diagram

Back 26

diagram of flowchart illustrating the cost allocation process

Front 27

direct cost

Back 27

any cost that can be directly (unambiguously) related to a cost object at reasonable cost

Front 28

indirect costs

Back 28

any cost that cannot be directly related to a cost object

Front 29

work in process

Back 29

product in the production process but not yet complete

Front 30

finished goods

Back 30

product fully completed but not yet sold

Front 31

inventoriable costs

Back 31

costs added to inventory accounts

Front 32

fixed costs

Back 32

costs that are unchanged as volume changes within the relevant range of activity

Front 33

variable costs

Back 33

costs that change in direct proportion with a change in volume within the relevant range of activity

Front 34

relevant range

Back 34

activity levels within which a given total fixed cost or unit variable cost will be unchanged

Front 35

semi-variable cost

Back 35

cost that has both fixed and variable components; also called mixed costs

Front 36

step costs

Back 36

cost that increases with volume in steps; also called semi-fixed cost

Front 37

full cost

Back 37

sum of all costs of manufacturing and selling a unit of product (Includes both fixed and variable costs)

Front 38

full absorption cost

Back 38

al variable and fixed manufacturing costs; used to complete a product's inventory value under GAAP

Front 39

gross margin

Back 39

revenue- cost of goods sold on income statements. per unit, the gross margin equals sales price- full absorption cost per unit

Front 40

contribution margin

Back 40

sales price- variable costs per unit

Front 41

full absorption costing (traditional income statement)

Back 41

approach required by GAAP, all fixed and variable manufacturing costs are product costs and variable manufacturing costs are product costs, all other costs are period costs

Front 42

variable costing (contribution margin income statement)

Back 42

only variable manufacturing costs are product costs, all others are period costs.

Front 43

managerial costing

Back 43

assumes that management will decide which costs are assigned as product or period costs.