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26 Cards in this Set

  • Front
  • Back
Raw materials
materials that go into a final product
Manufacturing costs
Direct Materials, Direct Labor, Manufacturing Overhead
Direct Materials
materials that become an integral part of the finished product and whose costs can be conveniently traced to the final product
Direct Labors
labor costs that can be easily traced to individual units of product (touch labor), workers touch product while it is being made
Manufacturing Overhead
includes indirect materials, indirect labor, maintenance and repairs on product equpiment, heat/light/property taxes, depreciation, and insurance on manufacturing facilities. Only costs associated with operating the factory are included here.
Nonmanufacturing costs
selling and administrative costs. Selling, general, and adminstrative costs (SG&A)
Selling costs
all costs that are incurred to secure customer orders and get the finished product to the customer. Ex: advertising, shipping, sales travel, sales commissions...
Administrative costs
costs associated with the general management of an organization. Ex: exexutive compensation, general accounting, secretarial, public relations
Product Costs
all costs involved in acquiring or making a product. Direct materials, Direct labor, and manufacturing overhead. Costs are released from inventory as expenses when goods are sold. Stay on balance sheet until sold and then transfer to income statement
Period Costs
All selling and administrative expenses. Expensed on the income statement in the period in which they are incurred (accural accounting)
Variable Cost
varies, IN TOTAL, in direct proportion to changes in the level of activity
Activity base
a measure of wahtever causes the incurrence of a variable cost: cost driver. Ex: Direct labor hours, machine hours, units produced, units sold
Fixed Cost
cost that remains constant, in total, regardless of changes in the level of activity. not affected by changes in activity
Mixed Cost
contains both variable and fixed cost elements. Y= a + bX
Y= Total mixed cost
a= total fixed cost
b=variable cost per unit of activity
X=level of activity
Perform the high-low or least-squares regression calculation when..
the scattergraph plot reveals linear cost behavior
High low method
(Cost at high activity level-cost at low activity level)/(High activity level-Low activity level)
Fixed cost element EQUALS...
Total cost (at either high or low)- (variable cost X activity level at either high or low) But both have to be high or both have to be low
Traditional format income statement
Organize costs into cost of goods sold and selling and administrative expenses. COGS=product costs and S&A=period costs
Contribution approach
distinguishes between fixed and variable costs
Contribution margin
amoung remaining from sales revenues after variable expenses have been deducted
Direct Costs
costs that can be easily and conveniently traced to a unit of product or other cost object: Direct material and direct labor
Indirect costs
Costs that cannot be easily and conveniently traced to a unit of product or other cost object: manufacturing overhead
Differential cost
difference in costs between any two alternatives. Also known as incremental cost (but this refers only to an increase in cost from one alternative to another)
Differential revenue
difference in revenues between any two alternatives
Opportunity cost
potential benefit that is given up when on alternative is slsected over another
Sunk cost
cost that has already been incurred and that cannot be changed by any decision made now or in the future