Cost Accounting 331

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38 Terms

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Cost object
Anything you want a cost measure for
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Direct cost
Traceable to the cost object economically
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Indirect cost
Not traceable, so it is allocated
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Cost tracing
Assigning direct costs
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Cost allocation
Assigning indirect costs using a base
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Cost pool
A group of indirect costs
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Cost driver / allocation base
What causes (or is used to assign) indirect cost
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Variable / fixed cost
Total changes with volume / total stays constant
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Mixed cost
Has both fixed and variable parts
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Relevant range
Activity band in which cost behavior assumptions hold
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Direct materials (DM)
Materials that become part of the product
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Direct labor (DL)
Labor traceable to the product
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Manufacturing overhead (MOH)
All other factory costs
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Inventoriable cost
Manufacturing cost, held in inventory until sold
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Period cost
Expensed in the period (selling and admin)
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WIP / FG
Work in process (partly finished goods) / finished goods (completed, unsold goods)
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COGM
Cost of goods manufactured, moved from WIP to FG
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COGS
Cost of goods sold, expensed when sold
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Gross margin
Sales minus COGS
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Contribution margin
Sales minus variable costs
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CM ratio
CM / sales
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Breakeven point
Volume where operating income = 0
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Margin of safety
Sales above breakeven
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Operating leverage (DOL)
CM / operating income, sensitivity of profit to sales
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Target operating income
Desired profit before tax
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Job costing / process costing
Distinct jobs / masses of identical units
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Actual costing
Actual overhead rate x actual base
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Normal costing
Budgeted overhead rate x actual base
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Predetermined overhead rate
Budgeted MOH / budgeted base
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Applied (allocated) overhead
POHR x actual base quantity
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Overapplied / underapplied
Applied > actual / applied < actual
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Peanut-butter costing
Broad averaging with one rate
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Overcosting / undercosting
Reported cost above / below resources consumed
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Cross-subsidization
One product's undercosting causes another's overcosting
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Activity-based costing (ABC)
Cost pools by activity, each with its own driver
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Activity rate
Pool cost / driver quantity
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Cost hierarchy
Unit, batch, product-sustaining, facility-sustaining
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Activity-based management (ABM)
Using ABC info to improve decisions