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24 Cards in this Set
- Front
- Back
allocation
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process of dividing a total cost into parts and assigning the parts to the relevant cost objects
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allocation base
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the factor used as the base for cost allocation; when possible, a driver of the allocated cost
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allocation rate
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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
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common costs
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costs that are incurred to support more than one cost object but cannot be traced to any specific object
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controllable costs
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costs that can be influenced by a particular manager's decisions and actions
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cost accumulation
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measuring the cost of a particular object by combining many individual cost into a single total cost
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cost allocation
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process of dividing a total cost into parts and assigning the parts to relevant objects
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cost driver
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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
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cost objects
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items for which mangers need to measure cost; can be products, processes, departments, services, activities, and so on
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cost pools
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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.
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cost tracing
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assigning specific costs to the objects that cause their incurrence
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direct cost
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cost that is easily traceable to a cost object and for which it is economically feasible to do so.
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direct method
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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 |
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indirect cost
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cost that either cannot be easily raced to a cost object of for which it is not economically feasible to do so
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interdepartmental service
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service performed by one service department for the benefit of another service department
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joint costs
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common costs incurred in the process of making two or more products
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joint products
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separate products derived from common inputs
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operating departments
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departments that perform tasks directly related to accomplishing the organization's objectives
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overhead costs
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indirect costs of operating a business that cannot be directly traced to a product, department, process, or service, such as depreciation
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predetermined overhead rate
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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
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reciprocal method
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allocation method that uses simultaneous linear equations to account for two-way relationships among service centers; the resultant cost distribution are difficult to interpret
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reciprocal relationships
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tow-way relationships in which department provide services to an receive services form on another
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split-off point
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stage in the production process where products made from common inputs become separate and identifiable
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step method
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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
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