Cost Exam 1 Vocab

cost accounting

field of accounting that measures, records, and reports information about costs

cost-benefit analysis

process of comparing benefits (often measured in savings or increased profits) with costs associated with a proposed change within an organization

cost drivers

factors that cause or drive costs

data analytics

systematic evaluation of information to address a decision problem

data visualization

how the results of the data analysis are summarized and presented

differential costs

with two or more alternatives, costs that differ among or between alternatives

differential revenues

revenues that change in response to a particular course of action

distribution chain

set of firms and individuals that buys and distributes goods and services from the firm

enterprise resource planning (ERP)

information technology that links the various systems of the enterprise into a single comprehensive information system

nonvalue-added activities

activities that do not add value to the good or service

responsibility center

specific unit of an organization assigned to a manager who is held accountable for its operations and resources

supply chain

set of firms and individuals that sells goods and services to the firm

value-added activities

those activities that customers perceive as adding utility to the goods or services they produce

value chain

set of activities that transforms raw resources into the goods and services that end users purchase and consume

administrative costs

costs required to manage the organization and provide staff support, including executive salaries, costs of data processing, and legal costs

contribution margin

sales price - variable costs per unit

conversion costs

direct labor and manufacturing overhead

cost allocation

process of assigning indirect costs to products, services, people, business units, etc

cost object

any end to which a cost is assigned; examples include a product, a department, or a product line

cost pool

collection of costs to be assigned to the cost objects

full absorption cost

all variable and fixed manufacturing costs; used to compute a product’s inventory value under GAAP

full cost

sum of all costs of manufacturing and selling a unit or product (includes both fixed and variable costs)

gross margin

revenue - COGS on income statements

per unit, the gross margin equals sales price - full absorption cost per unit

operating profit

excess of operating revenues over the operating costs necessary to generate those revenues

period costs

costs recognized for financial reporting when incurred

prime costs

direct materials and direct labor

product costs

costs assigned to the manufacture of products and recognized for financial reporting when sold

relevant range

activity levels within which a given total fixed cost or unit variable cost will be unchanged

account analysis

cost estimation method that calls for a review of each account making up the total cost being analyzed

adjusted r-squared (r2)

correlation coefficient squared and adjusted for the number of independent variables used to make the estimate

coefficient of determination

square of the correlation coefficient, interpreted as the proportion of the variation in the dependent variable explained by the independent variables

correlation coefficient

measure of the linear relation between two or more variables, such as cost and some measure of activity

dependent variable

y term on the left-hand side of a regression equation

engineering estimate

cost estimate based on measurement and pricing of the work involved in a task

high-low cost estimation

method to estimate costs based on two cost observations, usually at the highest and lowest activity levels

independent variable

x term, or predictor, on the right-hand side of a regression equation

learning phenomenon

systematic relationship between the amount of experience in performing a task and the time required to perform it

regression

statistical procedure to determine the relation between variables

relevant range

activity levels within which a given total fixed cost or unit variable cost will be unchanged

t-statistic

t is used to test the significance of the coefficient

continuous flow processing

system that generally mass-produces a single, homogeneous output in a continuing process

cost management system

system to provide information about the costs of processes, products, and services used and produced by an organization

job

unit of a product that is easily distinguishable from other units

job costing

accounting system that traces costs to individual units or to specific jobs, contracts, or batches of goods

operation

standardized method or technique that is repeatedly performed in making a product

operations costing

hybrid costing system used in manufacturing goods that have some common characteristics and some individual characteristics

predetermined overhead rate

cost per unit of the allocation base used to charge overhead to products

process costing

accounting system used when identical units are produced through a series of uniform production steps

two-stage cost allocation

process of first allocating costs to intermediate cost pools and then to the individual cost objects using different allocation bases

actual cost

cost of job determined by actual direct material and labor cost plus overhead applied using an actual overhead rate and an actual allocation base

control account

account in the general ledger that summarizes a set of subsidiary ledger accounts

job cost sheet

record the cost of the job kept in the accounting system

job shop

firm that produces jobs

normal cost

cost of job determined by actual direct material and labor cost plus overhead applied using a predetermined rate and an actual allocation base

overapplied overhead

excess of applied overhead costs over actual overhead incurred during a period

project

complex job that often takes months or years to complete and requires the work of many different departments, divisions, or subcontractors

standard cost

cost of job determined by standard (budgeted) direct material and labor cost plus overhead applied using a predetermined overhead rate and a standard (budgeted) allocation base

subsidiary ledger account

account that records financial transactions for a specific customer, vendor, or job

underapplied overhead

excess of actual overhead costs incurred over applied overhead costs