ACCT102 Ch. 2
Terms
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copy deck
- conversion cost
- direct labor cost plus manufacturing overhead cost
- selling costs
- all costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer; i.e. advertising, shipping, sales travel, sales commissions, sales salaries, costs of finished goods warehouses
- quality circles
- small groups of employees that meet on a regular basis to discuss ways of improving quality
- manufacturing overhead
- all manufacturing costs except direct materials and direct labor; i.e. indirect manufacturing costs, maintenance and reparis on production equipment, property taxes, depreciation, insurance on manufacturing facilities
- inventoriable costs
- synonym for product costs; costs go directly into inventory acct as they are incurred and remain as assets if goods are only partially completed or are unsold at end of period
- direct cost
- a cost that can be easily and conveniently traced to a specified cost object
- indirect materials
- small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it
- cost object
- anything for which cost data are desired; i.e. products, customers, jobs, parts of org such as deparments/divisions
- direct materials
- materials that become an integral part of a finished product and whose costs can be conveniently traced to it
- product costs
- all costs that are involved in acquiring or making a product; in the case of manufactured goods, they consist of direct materials, direct labor, and manufacturing overhead
- administrative costs
- all executive, organization, and clerical costs associated with the general management of an organization rather than with manufacturing or selling; a nonmanufacturing/period cost; i.e. executive compensation, general acct, secretarial, public relations
- differential revenue
- the difference in revenue between 2 alternatives
- cost behavior
- they way in which a cost reacts to change in the level of activity
- internal failure costs
- costs that are incurred as a result of identifying defective products before they are shipped to customers
- quality of conformance
- the degree to which a product or service meets or exceeds its design specifications and is free of defects or other problems that mar its appearance or degrade its performance
- cost of goods sold in merchandising company
- beg merchandise inventory + purchases - end merchandise inventory
- fixed cost
- a cost that remains constsant, in total, regardless of changes in the level of activity within the relevant range; thsi cost varies inversely with the level of activity on a per unit basis
- external failure costs
- costs that are incurred when a product or service that is defective is delievered to a customer
- prevention costs
- costs that are incurred to keep defects from occurring
- cost of goods sold in manufacturing company
- beg finished goods inventory + cost of goods manufactured - end finished goods inventory
- quality cost report
- a report that details prevention costs, appraisal costs, and the costsz of internal and external failures
- period costs
- costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued; i.e. sales commissions, rental costs of admin offices
- opportunity cost
- the potential benefit that is given up when one alternative is selected over another
- decremental cost
- decrease in cost between 2 alternatives
- differential cost
- a difference in cost between 2 alternatives; the only cost that is relevant in a decision
- variable cost
- a cost that varies, in total, in direct proportion to changes in the level of activity; this cost is constant per unit
- cost of goods manufactured
- the manufacturing costs associated with the goods that were finished during the period; need to adjust total manufacturing cost with cost for partially completed goods - work in process
- statistical process control
- a charting technique used to monitor the quality of work being doen in a workstation for the purpose of immediately correcting any problems
- quality costs
- costs that re incurred to prevent defective products from falling into the hands of customers or that are incurre as a result of defective units
- common cost
- a cost that is incurred to support a number of cost objects but cannot be traced to them individually; a type of indirect cost
- ISO 9000 standards
- quality control requirements issued by the International Organization for Standardization that relate to products sold in European countries
- prime cost
- the sum of direct materials cost and direct labor cost
- incremental cost
- an increase in cost between 2 alternatives
- appraisal costs
- costs that are incurred to identify defective products before the products are shipped to customers
- indirect cost
- a cost that cannot be easily and conveniently traced to particular products
- sunk cost
- a cost that has already been incurred and that cannot be changed by an decision made now or in the future; should be ignored in decision making
- schedule of cost of goods manufactured
- a schedule showing the direct materials, direct labor, and manufacutring overhead costs incurred during a period and the portion of those costs that are assigned to Work in Process and Finished Goods