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43 Cards in this Set

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  • Back

Cost Pool

a grouping of individual cost items.

Cost-allocation Base

a factor that links in a systematic way an indirect cost or group ofindirect costs to a cost object.

Cost allocation

the assigning of indirect costs to the chosen cost object.

Cost tracing

the assigning of direct costs to the chosen cost object.

Responsibility Center

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

Job-costing System

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

Process-costing system

identical units being sold in masses. Homogeneous.

source document

original record that supports journal entries.

Job Cost Record

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

Materials-requisition record

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

The numerator reason

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.

The denominator reason

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.

Normal Costing

Indirect costs based on the budgeted indirect-cost rate(s) x the actual activity consumption. less accurate, but allows for real-time job costing

Budgeted indirect cost rate

gives rise to normal costing.

Actual Costing

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

Underallocated Overhead

Overhead Control > Overhead Allocated

Overallocated Overhead

Overhead Control < Overhead Allocated

Adjusted Allocation Rate Approach

all allocationsare recalculated with the actual, exact allocation rate.

Proration Approach

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.

Write-Off Approach

The difference is simply written off to COGS.

Manufacturing overhead allocated

The amount to individual jobs based on the budgeted rate multiplied by actual quantity used of the allocation base.

Over Costing

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

Under Costing

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.

Product-cost cross -subsidization

If a company undercosts one of its products, than it will overcost at least one of its other products.

Refined costing system

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.

Activity-Based Costing System (ABC)

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

Direct-cost tracing

reclassify some indirect costs as direct costs.

Cost Hierarchy

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.

Output unit-level costs

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).

Batch-level costs

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.

Product-sustaining costs

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

Facility-sustaining costs

Costs of activities that cannot be traced to individual products or services but support the organization as a whole. (Management Salaries, Building security).

Activity-based managment

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


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

Operating Budget

building blocks leading tothe creation of the Budgeted Income statement.

Financial Budget

building blocks based onthe Operating Budget that lead to the creation of the Budgeted Balance Sheet and the Budgeted Statement of Cash Flows.


the degree of influence that amanager has over costs, revenues, or related items for which he is being held responsible.

Budgetary Slack

The practice of underestimating budgetedrevenues, or overestimating budgeted expenses, in an effort to make the resulting budgeted goals (profits) more easily attainable.

Cost Center

Factory Floor. Things that are making the costs.

Revenue Center

Sales Department.

Profit Center

Grocery Store. Coordinate different product mixes.

Investment Center

Regional Manager. Identifying different opportunities to build new stores.

Budget variance

actual result deviation from budgeted amounts.