Cost Accumulation for Inventory Valuation and Profit Measurement

These flashcards cover key terminology and concepts related to cost accumulation for inventory valuation and profit measurement, aiding in exam preparation.

Cost Allocation System

A system used to allocate costs between cost of goods sold and inventories for reporting purposes.

Cost Object

Anything for which a separate measurement of cost is desired, such as products, services, or departments.

Direct Costs

Costs that can be accurately traced to cost objects.

Indirect Costs

Costs that cannot be directly traced to specific cost objects, also known as overheads.

Direct Costing Method

A costing system that assigns only direct costs to cost objects.

Absorption Costing System

A costing system that assigns both direct and indirect costs to cost objects.

Predetermined Overhead Rate (POHR)

A rate calculated before the period begins to allocate indirect costs to cost objects based on an allocation base.

Allocation Base

A characteristic used to assign costs to cost objects, often linked to the cause of costs.

Arbitrary Allocation

A cost allocation method where the chosen allocation base does not accurately reflect the incurred costs.

Service Department Costs

Costs incurred by departments that support the operating departments of an organization.

Interdepartmental Services

Services exchanged between different departments within an organization, affecting cost allocations.