Management accounting ch 2

Allocate

To assign an indirect cost to a cost object.

Assign

To attach a cost to a cost object.

Average Cost

The total cost divided by the number of units.

Biomimicry

A means of product design in which a company tries to mimic, or copy, natural biological processes.

Categorical Data

Data that have no numerical value or natural order but can be grouped into two or more categories.

Controllable Costs

Costs that can be influenced or changed by management.

Conversion Costs

The combination of direct labor and manufacturing overhead costs.

Cost Object

Anything for which managers want to know the cost.

Cost of Goods Manufactured

The cost of manufacturing the goods that were finished during the period.

Customer Service

Support provided for customers after the sale.

Data

A collection of observations.

Design

Detailed engineering of products and services and the processes for producing them.

Differential Cost

The difference in cost between two alternative courses of action.

Direct Cost

A cost that can be traced to a cost object; a cost that is readily identifiable or associated with the cost object.

Direct Labor

The cost of compensating employees who physically convert raw materials into the company’s products; labor costs that are directly traceable to the finished product.

Direct Materials

Primary raw materials that become a physical part of a finished product and whose costs are traceable to the finished product.

Distribution

Delivery of products or services to customers.

Excel Table

A data analytics tool that allows

Filtering

Viewing a subset of the data based on one or more criteria.

Finished Goods Inventory

Completed goods that have not yet been sold.

Fixed Costs

Costs that stay constant in total despite wide changes in volume.

Greenwashing

The unfortunate practice of overstating a company’s commitment to sustainability.

Indirect Cost

A cost that relates to the cost object but cannot be traced specifically to it; a cost that is jointly used or shared by more than one cost object.

Indirect Labor

Labor costs that are difficult to trace to specific products.

Indirect Materials

Materials whose costs are difficult to trace to specific products.

Life-Cycle Assessment

A method of product design in which the company analyzes the environmental impact of a product, from cradle to grave, in an attempt to minimize negative environmental consequences throughout the entire lifespan of the product.

Manufacturing Company

A company that uses labor, plant, and equipment to convert raw materials into new finished products.

Manufacturing Overhead

All manufacturing costs other than direct materials and direct labor; also called factory overhead and indirect manufacturing cost.

Marginal Cost

The cost of producing one more unit.

Marketing

Promotion and advertising of products or services.

Merchandising Company

A company that resells tangible products previously bought from suppliers.

Numerical Data

Data that can be measured, counted, or aggregated.

Operating Income

Earnings generated from the company’s primary ongoing operations; the company’s earnings before interest and taxes

Ordinal Data

Data that has a clearly defined order and may mix numerical and categorical data.

Other Indirect Manufacturing Costs

All manufacturing overhead costs aside from indirect materials and indirect labor.

Period Costs

The costs incurred by the company to operate the business that do not get treated as inventory but rather are expensed immediately in the period in which they are incurred. These costs do not relate to manufacturing or purchasing product. Period costs are often called operating expenses or selling, general, and administrative expenses.

Periodic Inventory

An inventory system in which Cost of Goods Sold is calculated at the end of the period rather than every time a sale is made.

Perpetual Inventory

An inventory system in which both Cost of Goods Sold and Inventory are updated every time a sale is made.

Prime Costs

The combination of direct material and direct labor costs.

Product Costs

The costs incurred by manufacturers to produce their products or incurred by merchandisers to purchase their products. For external financial reporting, GAAP requires that these costs be assigned to inventory until the products are sold, at which point they are expensed as Cost of Goods Sold.

Production or Purchases

Resources used to produce a product or service or to purchase finished merchandise intended for resale.

Raw Materials Inventory

All raw materials (direct materials and indirect materials) not yet used in manufacturing.