managerial accounting chapter 1+2

direct cost

a cost that can be easliy and conveniently traced to a specific cost object

indirect cost

a cost that cannot be easily and conveniently traced to a specific cost object

common cost

The cost that is incurred in support of several cost objects

direct materials

materials that are a integral part of the final product

indirect materials

Small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily traced to it.

direct labor

Factory labor costs easily traced to specific products. Also called touch labor.

indirect labor

The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be easily traced to particular products.

manufacturing overhead

All manufacturing costs except direct materials and direct labor.

selling costs

All costs incurred to secure customer orders and get the finished product or service into the hands of the customer.

admin costs

All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling.

product costs - factory

All costs involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead

period costs

costs related to sales and admin

variable costs

A cost that varies, in total, in direct proportion to changes in the level of activity.

fixed costs

costs that are fixed- remains constant

mixed cost

A cost with variable and fixed cost elements.

prime cost

sum of direct material cost and direct labor cost

conversion costs

sum of direct labor and manufacturing overhead

cost behavior

how a cost reacts to changes in the level of activity.

activity base

A measure of whatever causes the incurrence of a variable cost.

differential cost

A future cost that differs between any two alternatives

opportunity cost

the potential benefit given up when one alternative is selected over another.

sunk cost

has already been incurred and cannot be changed by any decision made now or in the future.

contribution format

separates costs into fixed and variable categories, first deducting all variable expenses from sales to obtain the contribution margin.

job order costing

used by companies that make many different products, each with unique features.