Cost Accounting Concepts and Formulas

A set of flashcards covering key concepts and formulas from the cost accounting lecture, aimed at reinforcing vocabulary related to product and period costs, cost behavior, and profitability analysis.

Direct Materials

The raw materials that are directly traceable to the finished product.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold by a company.

Period Costs

Costs that are not tied directly to production and are expensed in the period incurred.

Work in Process (WIP)

Inventory that holds partially completed goods.

Cost of Goods Manufactured (COGM)

The total cost of producing goods during a specific period, calculated as Beginning WIP + Total Manufacturing Costs - Ending WIP.

Cost of Goods Sold (COGS) Formula

Calculated as Beginning Finished Goods + COGM - Ending Finished Goods.

Inventory

Assets that hold product costs before a sale.

Applied Overhead

Estimated overhead costs applied to products based on predetermined rates.

Underapplied Overhead

Occurs when applied overhead is less than actual overhead incurred.

Absorption Costing

A costing method required by GAAP that includes all manufacturing costs in product cost.

Relevant Range

The range in which the assumptions about cost behavior are valid.

Contribution Margin (CM)

Sales revenue remaining after variable costs have been deducted.

Break-even Point

The level of sales at which profit is zero.

Margin of Safety

The difference between actual sales and break-even sales.

Operating Leverage

A measure of how sensitive profit is to sales changes, calculated as Contribution Margin ÷ Net Income.

Mixed Cost

A cost that has both fixed and variable components.