ACCT Exam Vocab

Traceable fixed cost

Traceable to a segment (not a unit)

Joint cost

The costs of a production process that yields multiple products

Relevant data

Expected future data that differs among alternatives

Sunk cost

Costs that were incurred in the past and cannot be changed, regardless of what future action is taken; and is not relevant. Ex: depreciation, original price of an asset

Goal congruence

Aligning the goals of business segment managers and other subordinates with the goals of top management

Opportunity cost

The benefit given up by choosing an alternative course of action

Responsibility center

A segment for which a manager has decision-making authority and accountability for the results of those decisions

Responsibility reports

Performance reports with a focus on responsibility and control (not a financial statement)

Cost center

A responsibility center whose manager is only responsible for controlling costs

Revenue center

A responsibility center whose manager is only responsible for generating revenue

Profit center

A responsibility center whose manager is responsible for generating revenue and controlling costs

Investment center

A responsibility center whose manager is responsible for generating profits and efficiently managing the center’s invested capital

Annuity

A series of equal payments

Payback method

Measures the length of time it takes to recover, in net cash inflows, the cost of the initial investment

Accounting rate of return (ARR)

Measures profitability of an invetsment

Net present value (NPV)

Measures the net difference between the present value of an investment’s net cash inflows and the investment’s initial cost

Internal rate of return (IRR)

The interest rate that is the NPV of the investment equal to zero