Preparation for ACC 220 Test on Chapters 1-3

Direct costs

Costs that can be directly traced to a cost object, such as raw materials for a product

Indirect costs

Costs that cannot be directly traced to a cost object, like factory rent

Prime costs

Direct materials cost plus direct labor cost

Conversion costs

Direct labor cost plus manufacturing overhead cost

MOH

Manufacturing overhead costs; includes all indirect manufacturing costs

Product costs

Costs directly associated with producing goods

Period costs

Costs not directly tied to the production process, like administrative expenses

Fixed costs

Costs that remain constant regardless of production levels

Variable costs

Costs that change in relation to production levels

Mixed costs

Costs that have both fixed and variable components

MOH included

Indirect materials, indirect labor, maintenance, utilities; included for consistency

MOH not included

Direct materials, direct labor; not included as they are already separately accounted for

POHR

Predetermined overhead rate; calculated using estimated overhead costs and an activity base

Contribution Margin

Sales revenue minus variable costs; used to cover fixed costs and contribute to profits

Job costing

Assigning costs to a specific job or project to determine its total cost

Overapplied MOH

When actual overhead costs are less than applied overhead costs; impacts income statement

Underapplied MOH

When actual overhead costs exceed applied overhead costs; affects income statement

Cost behavior

How costs change with variations in activity levels