Cost Management - Key Terms For Mac-1

Front 1

abnormal spoilage

Back 1

is due to reasons other than the usual course of operations of a process

Front 2

activity-based costing (ABC)

Back 2

is a costing method that first assigns costs to activities and then to goods and services based on how much each good or service uses the activities

Front 3

backflush costing

Back 3

is a simplified cost-accounting system in which all manufacturing costs are charged directly to Cost of Goods Sold, and then end-of-period adjustments are made to credit Cost of Goods Sold and debit the respective inventory accounts

Front 4

balanced scorecard

Back 4

is a performance measurement system or business model that ties together knowledge of strategy, processes, activities, and operational and strategic performance measures

Front 5

base budgeting

Back 5

is a budgeting system wherein the initial budget for each organizational department is set in accordance with a base package, which includes the minimal resources required for the subunit to exist at an absolute minimal level

Front 6

batch-level resources and activities

Back 6

are acquired and performed to make a group, or batch, of similar products

Front 7

benchmarking

Back 7

is a technique for determining an organization's competitive advantage by learning about its own products, services, and operations and comparing them against the best performers

Front 8

benchmarks

Back 8

are important competitive features that form the bases of comparison and exist either inside or outside one's own organization, or in other industries

Front 9

benefit–cost analysis

Back 9

see cost–benefit analysis

Front 10

bottleneck

Back 10

is the constraint or constraining factor limiting production or sales

Front 11

budget

Back 11

is a detailed plan, expressed in quantitative terms, that specifies how an organization will acquire and use resources during a particular period of time

Front 12

capacity

Back 12

is a measure of a process's ability to transform resources into valued products and services

Front 13

constraint

Back 13

is a process or resource in a system that limits the throughput of the system

Front 14

cost allocation

Back 14

assigns indirect costs to products or organizational units (e.g., departments)

Front 15

cost center

Back 15

is an organizational subunit whose manager is responsible for the cost of an activity for which a well-defined relationship exists between inputs and outputs

Front 16

cost estimation

Back 16

is the process of estimating the relationship between costs and the cost drivers that cause those costs

Front 17

cost pools

Back 17

are groups or categories of individual cost items

Front 18

cost variance

Back 18

is the difference between the actual cost and the standard cost

Front 19

cost-based transfer pricing

Back 19

sets the transfer price on the basis of the cost of the product or service transferred

Front 20

cost-driver base

Back 20

is the base used to trace or assign costs to activities

Front 21

cost-driver rate

Back 21

is the estimated cost of resource consumption per unit of cost-driver base for each activity

Front 22

cost-management systems

Back 22

represent a set of cost-management techniques that function together to support the organization's goals and activities

Front 23

cost-reduction target

Back 23

is the difference between the total target cost and the currently feasible total cost

Front 24

cost-volume-profit (CVP) model

Back 24

is a profit-planning model that reflects the effects of changes in an organization's sales volume, revenue, and costs on profit or income

Front 25

currently feasible cost

Back 25

is the cost of all current operations necessary to produce and deliver a product

Front 26

customer-level resources and activities

Back 26

are acquired and performed to serve specific customers

Front 27

customer profitability analysis

Back 27

identifies the costs and benefits of serving specific customers or customer types to improve an organization's overall profitability

Front 28

differential costs

Back 28

are costs that differ between decision alternatives

Front 29

direct-labor budget

Back 29

shows the number of hours and the cost of direct labor to be used during a budget period

Front 30

direct-labor efficiency variance

Back 30

is the difference between the actual hours and the standard hours of direct labor allowed, given actual output, multiplied by the standard hourly labor rate

Front 31

direct-labor mix variance

Back 31

(for a particular type of direct labor), is the difference between the actual and standard input proportions for that type of direct labor multiplied by that labor type's standard rate and multiplied by the actual total quantity of all direct labor used

Front 32

direct-labor rate variance

Back 32

is the difference between the actual and standard hourly labor rate multiplied by the actual quantity of direct labor used

Front 33

direct-labor yield variance

Back 33

(for a particular type of direct labor), is the difference between the actual quantity of all direct labor used and the standard quantity of all direct labor, given actual output, multiplied by the standard rate for that particular type of direct labor and multiplied by the standard input proportion for that type of direct labor

Front 34

direct-material budget

Back 34

shows the number of units and the cost of materials to be purchased and used during a budget period

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direct-material mix variance

Back 35

(for a particular direct material) is the difference between the actual and standard input proportions for that direct material multiplied by that material's standard price and multiplied by the actual total quantity of all direct materials used

Front 36

direct-material price variance

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(or purchase price variance) is the difference between the actual and standard price multiplied by the actual quantity of material purchased

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direct-material quantity variance

Back 37

is the difference between the actual quantity and the standard quantity of material allowed, given actual output, multiplied by the standard price

Front 38

direct-material yield variance

Back 38

(for a particular direct material) is the difference between the actual quantity of all direct materials used and the standard quantity of all direct materials, given actual output, multiplied by that particular direct material's standard price and multiplied by that direct material's standard input proportion

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direct-service (or line) departments

Back 39

provide services directly to external customers

Front 40

discretionary cost center

Back 40

is an organizational subunit whose manager is held accountable for costs, but the subunit's input– output relationship is not well specified

Front 41

excess (or unused) capacity

Back 41

is the amount (if any) by which practical capacity exceeds the demand for the output of the process

Front 42

fixed-overhead budget variance

Back 42

is the difference between actual fixed overhead and budgeted fixed overhead

Front 43

fixed-overhead volume variance

Back 43

is the difference between budgeted fixed overhead and applied fixed overhead

Front 44

flexible budget

Back 44

is a budget that is valid for a range of activity

Front 45

high-low method

Back 45

estimates a cost function using only the costs and the level of cost-driver activity from the highest and lowest levels of cost-driver activity

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internal control

Back 46

is a process designed to provide reasonable assurance that an organization will achieve its objectives

Front 47

inventory carrying costs

Back 47

are costs of receiving, handling, storing, and insuring inventory

Front 48

kaizen costing

Back 48

is the process of cost reduction during the manufacturing phase of a product

Front 49

manufacturing-overhead budget

Back 49

shows the cost of overhead expected to be incurred in the production process during the budget period

Front 50

marketing costs

Back 50

include the costs of personnel, databases, equipment, and facilities dedicated to providing market research, marketing strategy, and marketing plans

Front 51

mixed costs

Back 51

have both a fixed and a variable component

Front 52

operational budgets

Back 52

specify how an organization's operations will be carried out to meet its demand for goods or services

Front 53

overhead cost performance report

Back 53

shows the actual and flexible-budget cost levels for each overhead item, together with the variable-overhead spending and efficiency variances and the fixed-overhead budget variance

Front 54

participative budgeting

Back 54

involves employees throughout an organization in the budgeting process

Front 55

performance measure

Back 55

is an indicator that allows a person to determine the level of performance according to some critical attribute and to compare performance to expectations

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process capacity

Back 56

is a measure of a process's ability to transform recourses into valued products and services

Front 57

process efficiency

Back 57

is the ability to transform inputs into outputs at lowest cost

Front 58

product mix

Back 58

is the relative proportion of each type of product planned or actually sold

Front 59

production budget

Back 59

shows the number of units of services or goods that are to be produced during a budget period

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production cycle time

Back 60

is the time between starting and finishing a production process, including time to correct mistakes

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production processes

Back 61

directly result in the production of products or services provided to external customers

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productivity

Back 62

is the ratio of outcomes of a process divided by the amount of resources necessary to complete the process

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product-level resources and activities

Back 63

are acquired and performed to produce and sell a specific good or service

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profit center

Back 64

is an organizational subunit whose manager is held accountable for profit

Front 65

qualitative information

Back 65

is descriptive and based on characteristics or perceptions, such as relative desirability, rather than quantities

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quantitative information

Back 66

is expressed in dollars or other quantities relating to size, frequency, and so on

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relative performance evaluation

Back 67

is based on comparing an individual's performance to that of others

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relevant costs and benefits

Back 68

occur in the future and differ among feasible decision alternatives

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revenue center

Back 69

is an organizational subunit whose manager is held accountable for the revenue attributed to the subunit

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revenue market-share variance

Back 70

holds constant the total industry volume at its actual sales level and focuses on the company's market share

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revenue market-size variance

Back 71

holds constant the company's market share at its budgeted level and focuses on changes in total industry volume

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revenue sales-mix variance

Back 72

focuses on the effects of changes in the sales mix while holding constant the effects of the products' sales prices and the total sales volume

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revenue sales-quantity variance

Back 73

holds constant the sales-price and sales-mix effects and focuses on the effect of the overall unit sales volume

Front 74

revenue sales-volume variance

Back 74

holds constant the products' sales prices at their budgeted levels and focuses on deviations between actual and budgeted sales volumes

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revolving (or continuous) budget

Back 75

is another name for a rolling budget

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rolling (or revolving or continuous) budget

Back 76

is continually updated by periodically adding a new incremental time period

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safety stock

Back 77

is the potential excess usage of material when material usage fluctuates during the lead time

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sales budget

Back 78

displays the projected sales in units and the projected sales revenue

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sales forecasting

Back 79

is the process of predicting sales of services or goods

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sales margin

Back 80

is income divided by sales revenue

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sales mix

Back 81

is the relative proportion of each type of product planned or actually sold

Front 82

sales-price variance

Back 82

focuses on the differences between actual and budgeted sales prices while holding constant the sales volume at its actual level

Front 83

selling, general, and administrative (SG&A) expense budget

Back 83

shows the planned amounts of expenditures for selling, general, and administrative expenses during a budget period

Front 84

semivariable costs

Back 84

have both a fixed and a variable component

Front 85

sensitivity analysis

Back 85

is the study of how the outcome of a decision- making process changes as one or more of the assumptions change

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standard-costing system

Back 86

enters the standard costs of direct material, direct labor, and manufacturing overhead into the Workin- Process Inventory account

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standard direct-labor quantity

Back 87

is the number of labor hours normally needed to manufacture one unit of product

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standard direct-labor rate

Back 88

is the total hourly cost of compensation, including fringe benefits

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standard direct-material price

Back 89

is the total delivered cost after subtracting any purchase discounts

Front 90

standard direct-material quantity

Back 90

is the total amount of materials normally required to produce a finished product, including allowances for normal waste or inefficiency

Front 91

step (semifixed) costs

Back 91

increase in steps as the amount of the cost-driver volume increases

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strategic decision making

Back 92

is the process of choosing and implementing actions that will affect an organization's future abilities to achieve its goals

Front 93

strategic performance analysis

Back 93

measures whether a strategic decision has met expectations

Front 94

strategy

Back 94

is an organization's overall plan or policy to achieve its goals

Front 95

tangible objectives

Back 95

are benchmarks capable of being measured in some manner

Front 96

target costing

Back 96

is a decision-making method that seeks to achieve products and services with specific features at target costs based on expected market prices and target profits

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target profit

Back 97

is the desired excess of periodic or project sales revenues over costs

Front 98

task analysis

Back 98

is the technique of setting standards by analyzing the production process

Front 99

theoretical capacity

Back 99

(of a process) is the maximum possible rate of transformation of inputs into outputs if the process were fully used, with no downtime or unused capacity

Front 100

theory of constraints

Back 100

seeks to improve productive processes by focusing on constrained resources

Front 101

throughput

Back 101

is the amount of goods and services produced and delivered to customers during a period of time measured in dollar terms or physical measures

Front 102

throughput time ratio

Back 102

is the ratio of the time spent adding customer value to products and services divided by total cycle time (also known as the "ratio of work content to lead time")

Front 103

time-based activity-based costing

Back 103

Time-based activity-based costing (ABC) is a method of ABC that uses time as the cost driver base to replace some or all parts of ABC systems that have multiple cost-driver bases

Front 104

total factor productivity

Back 104

is the value of goods and services divided by the total cost of providing them

Front 105

unit-level resources and activities

Back 105

are acquired and performed specifically for individual units of product or service

Front 106

variable-overhead efficiency variance

Back 106

is the difference between the actual and standard hours of an activity base (or cost driver) multiplied by the standard variable-overhead rate

Front 107

variable-overhead spending variance

Back 107

is the difference between the actual variable-overhead cost and the product of the standard variable-overhead rate and the actual hours of an activity base (or cost driver)

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weighted-average cost of capital (WACC)

Back 108

is the average of the after-tax cost of debt capital and the cost of equity capital, weighted by the relative proportions of the firm's capital provided by debt and equity

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weighted-average unit contribution margin (WAUCM)

Back 109

is the average of the various products' unit contribution margins weighted by the relative proportion of each product sold

Front 110

zero-base budgeting

Back 110

initially sets the budget for virtually every activity in the organization to zero

Front 111

activity

Back 111

is any discrete task that an organization undertakes to make or deliver a good or service

Front 112

administrative costs

Back 112

are incurred to manage the organization and provide staff support

Front 113

competitive advantage

Back 113

is a resource, process or value chain that enables an organization to provide more value, perhaps at lower cost, than its competitors

Front 114

cost management

Back 114

is a philosophy, an attitude, and a set of techniques to create more value at lower cost

Front 115

cost–benefit analysis

Back 115

is a method to measure the effects of plans by comparing costs and benefits, which can be either quantitative or qualitive

Front 116

customer-level costs

Back 116

are incurred for specific customers

Front 117

extended value chain

Back 117

encompasses the ways companies obtain their resources and distribute their products and services, possibly using the services of other organizations

Front 118

facility (or general-operations) level costs

Back 118

are incurred to maintain the overall facility and infrastructure of the organization

Front 119

operational performance analysis

Back 119

measures whether the performance of current operations is consistent with expectations

Front 120

opportunity cost

Back 120

is the forgone benefit of the best alternative use of a resource

Front 121

overtime premium

Back 121

is the extra hourly compensation paid to an employee who works beyond the time normally allowed by regulation or labor contracts

Front 122

process

Back 122

is a related set of tasks, manual or automated, that transforms inputs into identifiable outputs

Front 123

raw material

Back 123

is material that has not yet been entered into production

Front 124

relevant range

Back 124

is the range of activity within which the organization expects to operate and over which assumed cost patterns are reasonably accurate

Front 125

value chain

Back 125

is the relationship of an organization's processes that links ideas, resources, suppliers, and customers

Front 126

variances

Back 126

are the differences between a plan's actual and expected quantities

Front 127

absorption or full costing

Back 127

applies all manufacturing-overhead costs to (or absorbs) manufactured goods

Front 128

batch-level costs

Back 128

are incurred for every batch of product or service produced

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committed cost

Back 129

is a cost for which management has taken actions that result in some level of commitment to incur it

Front 130

contribution margin

Back 130

is the amount of sales revenue remaining, after covering all variable costs, to contribute to covering fixed cost and profit

Front 131

controllable cost

Back 131

Is a cost subject to the control or substantial influence of a particular individual

Front 132

conversion costs

Back 132

include direct labor and manufacturing overhead

Front 133

cost

Back 133

is the sacrifice made, usually measured by the resources given up, to achieve a particular purpose

Front 134

cost-accounting systems

Back 134

measure the use of resources in production

Front 135

cost driver

Back 135

is a characteristic of an activity or event that causes that activity or event to incur costs

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cost object

Back 136

is any end to which a cost is assigned, such as a product unit or a department

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cost of goods sold

Back 137

is the expense measured by the cost of the units sold during a specific period of time

Front 138

direct costs

Back 138

are costs traceable to a particular cost object

Front 139

direct labor

Back 139

is the cost of compensating employees whose work creates the organization's products

Front 140

direct materials

Back 140

are resources such as raw materials, parts, and components that one can feasibly observe being used to make a specific product

Front 141

expense

Back 141

is defined as the cost incurred when an asset is used up or sold for the purpose of generating revenue

Front 142

finished goods

Back 142

are products ready for sale

Front 143

fixed costs

Back 143

remain unchanged in total as the volume of activity changes

Front 144

Gantt chart

Back 144

depicts the stages required to complete a project and the sequence in which the stages are to be performed

Front 145

idle time

Back 145

is time not spent productively by an employee

Front 146

indirect costs

Back 146

are costs not feasibly traceable to a particular cost object

Front 147

indirect labor cost

Back 147

consists of the wages of production employees who do not work directly on the product but are required for the manufacturing facility to operate

Front 148

indirect materials

Back 148

relates to materials that either (1) are not a part of the finished product but are necessary to manufacture it or (2) are part of the finished product but are insignificant in cost

Front 149

inventoriable cost

Back 149

is another term for product cost

Front 150

manufacturing overhead

Back 150

includes all costs of transforming material into a finished product other than direct material and direct labor

Front 151

material requisition form

Back 151

is the source document for the transfer of raw material from Raw-Material Inventory to Workin- Process Inventory and to the job-cost record for the production job

Front 152

period costs

Back 152

are identified with the time period in which they are incurred rather than with units of purchased or produced goods

Front 153

prime costs

Back 153

are the primary costs of producing a good or service that includes direct materials and direct labor but not overhead

Front 154

product cost

Back 154

is a cost assigned to goods that were either purchased or manufactured for resale

Front 155

product-level costs

Back 155

are incurred for each line of product or service

Front 156

selling costs

Back 156

are the costs of sales personnel, databases, equipment, and facilities devoted to sales activities

Front 157

sunk costs

Back 157

are past payments for resources that cannot be changed by any current or future decision

Front 158

support (or service) departments

Back 158

do not work directly on a product but are necessary for the production process to operate

Front 159

throughput costing

Back 159

assigns only the unit-level spending for direct costs as the cost of products or services

Front 160

unit-level costs

Back 160

are incurred for every unit of product manufactured or service produced

Front 161

variable (or direct) costing

Back 161

applies only variable manufacturing overhead to manufactured goods as a product cost along with direct materials and direct labor

Front 162

variable costs

Back 162

change in total in direct proportion with a change in the activity volume

Front 163

work in process

Back 163

refers to partially completed products

Front 164

actual costing

Back 164

assigns only actual costs of both direct and indirect resources (i.e., direct materials, direct labor, and manufacturing overhead) to products

Front 165

actual overhead

Back 165

is the amount of manufacturing overhead actually incurred during an accounting period

Front 166

applied overhead

Back 166

is the amount of manufacturing overhead assigned to Work-in-Process Inventory as a product cost. It is calculated by multiplying the predetermined overhead rate by the actual cost driver volume.

Front 167

job-cost record (or file, card or sheet)

Back 167

reports the costs of all production-related resources used on the job to date

Front 168

job-order costing

Back 168

treats each individual job as the unit of output and assigns costs to each job as resources are used

Front 169

normal costing

Back 169

assigns to production jobs the cost of actual direct materials, actual direct labor, and applied manufacturing overhead, which are calculated by multiplying the predetermined overhead rate by the actual amount of the cost driver

Front 170

operation costing

Back 170

is a hybrid of job-order and process costing, which is used when companies produce batches of similar products with significantly different types of material

Front 171

overapplied overhead

Back 171

refers to actual overhead that is less than applied overhead

Front 172

overhead variance

Back 172

is the difference between the actual and the applied manufacturing overhead amounts

Front 173

predetermined overhead rate

Back 173

is the budgeted manufacturing overhead divided by the budgeted level of the cost driver

Front 174

product-costing system

Back 174

is a system that accumulates the costs of a production process and assigns them to the products that constitute the organization's output

Front 175

prorated overhead variance

Back 175

assigns proportionate amounts of it to Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold

Front 176

standard cost

Back 176

is a budget for the production of one unit of product or service

Front 177

standard costing

Back 177

uses a predetermined (or standard) rate for both direct and indirect costs (i.e., direct material, direct labor, and manufacturing overhead) to assign manufacturing costs to products

Front 178

throughput (cycle) time

Back 178

is the average time required to convert raw material into finished goods

Front 179

underapplied overhead

Back 179

refers to actual overhead that exceeds applied overhead

Front 180

activity-based management (ABM)

Back 180

is used by management to evaluate the costs and values of process activities to identify opportunities for improved efficiency

Front 181

pilot project

Back 181

is a limited-scope project intended to be a smallscale model of a larger, possibly systemwide, project

Front 182

resources supplied

Back 182

refer to the capacity that the organization makes available for use

Front 183

resources used

Back 183

refer to the resources actually used for productive purposes

Front 184

value-added activities

Back 184

enhance the value of products and services in the eyes of the organization's customer while meeting its own goals

Front 185

non-value-added activities

Back 185

do not contribute to customerperceived value

Front 186

target cost

Back 186

is the highest cost of a good or service that meets both customer needs and company profit goals

Front 187

unused capacity

Back 187

is the difference between the resources supplied and the resources used. Unused capacity is the amount of capacity that the organization has supplied that is not being used for productive purposes

Front 188

normal spoilage

Back 188

is spoiled product that results from the regular operation of the production process

Front 189

equivalent units

Back 189

represent the amount of work actually performed on products not yet complete translated to the work required to complete an equal number of whole units

Front 190

final product

Back 190

is one that is ready for sale without further processing

Front 191

first-in, first-out (FIFO) costing

Back 191

is an inventory method that identifies the first units completed as the first ones sold or transferred out

Front 192

intermediate product

Back 192

is a product that might require further processing before it is salable to the ultimate consumer

Front 193

lost units

Back 193

are goods that evaporate or otherwise disappear during a production process

Front 194

operation

Back 194

is a standardized method of making a product that is repeatedly performed

Front 195

prior department costs

Back 195

are manufacturing costs incurred in another department and transferred to a subsequent department in the manufacturing process

Front 196

process costing

Back 196

treats all units processed during a time period as the output to be costed and does not separate and record costs for each unit produced

Front 197

production cost reports

Back 197

summarize production and cost results for a period

Front 198

spoilage

Back 198

represents goods that are damaged, do not meet specifications, or are otherwise not suitable for further processing or sale as good output

Front 199

weighted-average costing

Back 199

is an inventory method that for product-costing purposes combines costs and equivalent units of a period with the costs and the equivalent units in beginning inventory

Front 200

by-product

Back 200

is the output from a joint-production process that is minor in quantity and/or economic value when compared to the main products

Front 201

constant gross margin percentage method

Back 201

allocates joint costs to products in a way that the gross margin as a percentage of revenue is the same for each product

Front 202

joint products

Back 202

are the products that jointly result from processing a common input

Front 203

joint costs

Back 203

are costs to operate joint processes, including the disposal of waste

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joint process

Back 204

simultaneously converts a common input into several outputs

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main product

Back 205

is a joint output that generates a significant portion of the net realizable value from the process

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net realizable value (NRV)

Back 206

is the measure of a product's contribution to profit after the split-off point and is computed as sales revenue minus additional processing costs

Front 207

net realizable value (NRV) method

Back 207

allocates joint costs based on the NRV of each main product at the split-off point

Front 208

physical-measures (or quantities) method

Back 208

is a joint-cost allocation based on the relative volume, weight, energy content, or other physical measure of each joint product at the split-off point

Front 209

relative sales value at split-off method

Back 209

allocates joint costs based on the relative sales values of the joint products at their split-off point

Front 210

split-off point

Back 210

is the point at which joint products separate in the production process

Front 211

cost allocation bases

Back 211

are factors used to assign indirect costs to cost objects

Front 212

direct method

Back 212

The direct method of cost allocation charges the costs of support service departments to internal customers without making allocations among support-service departments. All support-service cost allocations go directly to production departments

Front 213

production (or line) departments

Back 213

provide goods and services directly to external customers

Front 214

reciprocal method

Back 214

recognizes and allocates costs of all services provided by any support-service department, including those provided to other support-service departments

Front 215

reciprocal services

Back 215

are services provided among multiple supportservice departments

Front 216

step method

Back 216

(of cost allocation) allocates costs first from the support-service department with the largest proportion of its total allocation base in other support-service departments to other support-services or support- and direct-service or production departments, then allocates costs from less general support-service departments

Front 217

support-service costs

Back 217

are the costs of resources supplied by an organization to provide the support services

Front 218

support-service (or indirect) departments

Back 218

provide support services to each other and to the production departments