Cost Accounting & Product Pricing Reviewer

Comprehensive vocabulary flashcards covering Cost Accounting basics, CVP analysis, Job Order and Process Costing, ABC, Flexible Budgets, and Variance Analysis.

Cost/Managerial Accounting

Focuses on internal users, is future-oriented for planning and control, and is flexible to support decision-making.

Financial Accounting

Focuses on external users, is past-oriented for reporting, and must follow GAAP/IFRS.

Planning

The process of setting goals, predicting outcomes, and choosing between alternatives, such as budget preparation.

Control

The process of implementing plans, evaluating performance, and giving feedback, such as comparing actual results versus a budget.

Cost

The resource sacrificed to achieve a specific objective.

Cost Object

Anything being costed, such as a product, service, department, customer, or project.

Cost Driver

An activity that causes costs, such as machine hours, labor hours, or units produced.

Cost Allocation

The process of assigning indirect costs to a cost object.

Cost Tracing

The process of assigning direct costs to a cost object.

Direct Cost

Costs that can be conveniently traced to a cost object, such as direct materials and direct labor.

Indirect Cost

Costs that cannot be easily traced to a cost object, such as factory rent, supervisor salaries, and utilities.

Variable Cost

Costs that change in TOTAL with activity level but stay constant PER UNIT.

Fixed Cost

Costs that remain constant in TOTAL within a relevant range but decrease PER UNIT as production increases.

Relevant Range

The activity range where cost behavior assumptions (fixed and variable) remain valid.

Prime Cost

The sum of Direct Materials and Direct Labor: $\text{Prime Cost} = ext{Direct Materials} + ext{Direct Labor}$

Conversion Cost

The sum of Direct Labor and Manufacturing Overhead: $\text{Conversion Cost} = ext{Direct Labor} + ext{Manufacturing Overhead}$

Product Costs (Inventoriable)

Costs included in inventory (Direct Materials, Direct Labor, and Manufacturing Overhead) and expensed as COGS when sold.

Period Costs

Costs expensed immediately in the period they are incurred, such as selling and administrative expenses.

Direct Materials Used Formula

$$ext{Beginning DM Inventory} + ext{Purchases} - ext{Ending DM Inventory} = ext{DM Used}$$

Cost of Goods Manufactured (COGM) Formula

$$ext{Beginning Work In Progress} + ext{Total Manufacturing Costs} - ext{Ending WIP} = ext{COGM}$$

Contribution Margin (CM) per Unit

$$ext{Selling Price} - ext{Variable Cost per Unit}$$

Breakeven Point (Units)

$$rac{ ext{Fixed Costs}}{ ext{CM per Unit}}$$

Degree of Operating Leverage (DOL)

$$rac{ ext{\%} riangle ext{Sales}}{ ext{\%} riangle ext{Operating Income}}$$

Job Order Costing

A costing system used for unique products or custom orders where costs are tracked per individual job.

Process Costing

A costing system used for mass production of identical products where costs are averaged over all units produced.

Predetermined Overhead Rate (POHR)

$$rac{ ext{Estimated MOH}}{ ext{Estimated Allocation Base}}$$

Underapplied Overhead

Occurs when Actual MOH is greater than Applied MOH, meaning not enough overhead was allocated.

Overapplied Overhead

Occurs when Actual MOH is less than Applied MOH, meaning too much overhead was allocated.

Activity-Based Costing (ABC)

A costing method that allocates overhead based on activities that cause costs, providing more accuracy for diverse products or complex processes.

Cost Pool

A group of overhead costs related to a specific activity in an ABC system.

Flexible Budget

A budget that adjusts costs based on actual activity levels using the formula: $\text{Fixed Costs} + ( ext{Variable Rate} imes ext{Actual Activity})$

Material Price Variance (MPV)

$( ext{AP} - ext{SP}) imes ext{AQ}$, where AP is Actual Price, SP is Standard Price, and AQ is Actual Quantity.

Material Quantity Variance (MQV)

$( ext{AQ} - ext{SQ}) imes ext{SP}$, where AQ is Actual Quantity, SQ is Standard Quantity, and SP is Standard Price.

Labor Efficiency Variance (LEV)

$( ext{AH} - ext{SH}) imes ext{SR}$, where AH is Actual Hours, SH is Standard Hours, and SR is Standard Rate.

Relevant Cost

A future-oriented cost that affects a decision and differs among alternatives.

Sunk Cost

A past cost that has already been incurred and cannot be recovered; it is never relevant to future decisions.