Managerial Accounting

Front 1

allocation

Back 1

process of dividing a total cost into parts and assigning the parts to the relevant cost objects

Front 2

allocation base

Back 2

the factor used as the base for cost allocation; when possible, a driver of the allocated cost

Front 3

allocation rate

Back 3

the mathematical factor used to allocate or assign costs to a cost object, determined by dividing the total cost to be allocate by the appropriate cost driver or allocation base

Front 4

common costs

Back 4

costs that are incurred to support more than one cost object but cannot be traced to any specific object

Front 5

controllable costs

Back 5

costs that can be influenced by a particular manager's decisions and actions

Front 6

cost accumulation

Back 6

measuring the cost of a particular object by combining many individual cost into a single total cost

Front 7

cost allocation

Back 7

process of dividing a total cost into parts and assigning the parts to relevant objects

Front 8

cost driver

Back 8

any factor, usually a volume measure, that causes cost to be incurred; sometimes described as activity base or allocation base. Changes in cost drivers, such as labor-hours or machine-hours, cause corresponding changes in cost

Front 9

cost objects

Back 9

items for which mangers need to measure cost; can be products, processes, departments, services, activities, and so on

Front 10

cost pools

Back 10

a collection of costs organized around a common costs driver. The cost pool, as opposed to individual costs, is allocated to cost objects using the common cost driver, thereby promoting efficiency in the allocation process.

Front 11

cost tracing

Back 11

assigning specific costs to the objects that cause their incurrence

Front 12

direct cost

Back 12

cost that is easily traceable to a cost object and for which it is economically feasible to do so.

Front 13

direct method

Back 13

1) allocation method that allocates service center costs directly to operating department cost pools; does not account for any relationships among service centers
2) method of reporting case flows from operating activities on the statement of cash flows that show individual categories of cash receipts from and cash payments for major activities

Front 14

indirect cost

Back 14

cost that either cannot be easily raced to a cost object of for which it is not economically feasible to do so

Front 15

interdepartmental service

Back 15

service performed by one service department for the benefit of another service department

Front 16

joint costs

Back 16

common costs incurred in the process of making two or more products

Front 17

joint products

Back 17

separate products derived from common inputs

Front 18

operating departments

Back 18

departments that perform tasks directly related to accomplishing the organization's objectives

Front 19

overhead costs

Back 19

indirect costs of operating a business that cannot be directly traced to a product, department, process, or service, such as depreciation

Front 20

predetermined overhead rate

Back 20

allocation rate calculated before actual costs or activity are known; determined by dividing the estimate overhead costs for the coming period by some measure of estimated total production activity for the period, such as the number of labor-hours or machine-hours. The base should relate rationally to overhead use. The rate is used throughout the accounting period to allocate overhead costs to work in process inventory based on actual production activity

Front 21

reciprocal method

Back 21

allocation method that uses simultaneous linear equations to account for two-way relationships among service centers; the resultant cost distribution are difficult to interpret

Front 22

reciprocal relationships

Back 22

tow-way relationships in which department provide services to an receive services form on another

Front 23

split-off point

Back 23

stage in the production process where products made from common inputs become separate and identifiable

Front 24

step method

Back 24

two-step allocation method that accounts for one-way interdepartmental service center relationships by allocating costs from service centers to service centers as well as from service centers to operating departments; does not account fro reciprocal relationship between service centers