ACCT 201 Chapter 11 & 17
Terms
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- variable costing (or direct costing)
- A method of product costing in which only variable manufacturing overhead is included as a product cost that flows through the manufacturing accounts (i.e., Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold). Fixed manufacturing overhead is treated as a period cost.
- columnar flexible budget
- The budgeted overhead cost for each overhead item is listed in a column under a particular activity level; this format allows for only a limited number of activity levels.
- formula flexible budget
- A more general format for expressing a flexible budget; the managerial accountant expresses the relationship between activity and total budgeted overhead cost by using a formula.
- joint production process
- A special decision that results in two or more products, called joint products.
- flexible budget
- A budget that is valid for a range of activity.
- timely
- Information that is available in time for use in a decision analysis.
- sunk cost
- A cost that has already been incurred; does not affect any future cost and cannot be changed by any current or future action; these costs are irrelevant to decisions.
- relevant information
- Information that is pertinent to a decision problem.
- activity-based flexible budget
- A flexible budget based on several cost drivers rather than on a single, volume-based cost driver; provides a more accurate prediction (& benchmark) of OH costs.
- flexible overhead budget
- A detailed plan for controlling overhead costs that is valid in the firm's relevant range of activity.
- qualitative characteristics
- The factors in a decision problem that cannot be expressed effectively in numerical terms.
- absorption costing (or full costing)
- A method of product costing in which both variable and fixed manufacturing overhead are included in the product costs that flow through the manufacturing accounts (i.e., Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold)
- avoidable expenses
- Expenses that will no longer be incurred if a particular action is taken.
- accurate information
- Information that is precise and correct.
- opportunity cost
- The benefit of a forgone alternative; these costs are relevant to decisions.
- static budget
- A budget that is valid for only one planned activity level.
- split-off point
- The point in the production process where the joint products are identifiable as separate products.
- differential cost
- The difference in a cost item under two decision alternatives; these costs are relevant to decisions.
- unavoidable expenses
- Expenses that will continue to be incurred even if a subunit or activity is eliminated.
- outsourcing decision (or make-or-buy decision)
- A special decision which entails a choice between producing a product or service in-house or purchasing it from an outside supplier.