ACC 201: Introduction to Cost Accounting Vocabulary

Vocabulary flashcards covering core cost accounting terms, classifications, and concepts from ACC 201.

Accounting

The process concerned with analysing financial information of an organisation to provide detailed information to different users to make informed decisions.

Cost Accounting

The branch of Accounting largely concerned with accumulating costs of a product or service, classifying and analysing costs to provide information on an organization's activities, and advising managers on how to control costs.

Cost

The value of a resource that has been consumed, sacrificed, or lost during manufacturing or purchasing.

Cost Object

Any unit or activity for which management wants to accumulate and measure costs, such as a product or service unit.

Cost Centre

A location, person, or item of equipment in respect of which costs may be ascertained and related to a cost unit for control purposes (usually referring to departments).

Direct Costs

Costs that can be traced to a service or product with relative ease and are usually substantial.

Indirect Costs

Costs that cannot be traced easily to a product or service.

Product Costs

Manufacturing costs incurred and assigned to units produced, recognized as expenses when units are sold, and carried through inventory (inventoriable costs).

Period Costs

Non-manufacturing costs (selling, administration, distribution) expensed or written-off in the period in which they are incurred, without forming part of inventory (non-inventoriable costs).

Direct Materials

Materials that can be easily and conveniently identified with a product based on quantity, value significance, or ease of identification.

Direct Labour

Labour that can be identified directly with the making of a product, often referred to as touch-labour.

Manufacturing Overhead

All production costs incurred in manufacturing except direct materials and direct labour.

Prime Cost

The total of all direct costs of a product, usually consisting of direct material cost, direct labour cost/machining costs, and direct expenses.

Conversion Costs

The costs incurred in converting direct materials into finished products, consisting of direct labour and manufacturing overheads.

Fixed Costs

Costs that remain constant in total even if the production or activity level changes.

Variable Costs

Costs that vary or change directly with the level of activity and are measured on a per-unit basis.

Semi-variable Costs

Also known as mixed costs, these are costs containing both a fixed component and a variable component.

Semi-fixed Costs

Also known as stepped-fixed costs, these are costs that remain fixed within a specific activity level but increase by a given fixed amount as activity increases beyond thresholds.

Variance Analysis

The comparison of estimated results against actual results.