Cost Accounting – 12th Edition
Ch 12 Terms
Collusive pricing – companies in an industry conspire in their pricing and production decisions to achieve a price above the competitive price and so restrain trade
Cost incurrence – describes when a resource is consumed (or benefit forgone) to meet a specific objective
Customer life-cycle costs – focuses on the total costs incurred by a customer to acquire and use a product or service until it is replaced
Designed-in costs – see locked-in costs
Dumping – under U.S. laws, occurs when a non-U.S. company sells a product in the United States at a price below the market value in the country where it is produced, and this lower price materially injures or threatens to materially injure an industry in the United States
Life-cycle costing – system that tracks and accumulates individual value-chain costs attributable to each product from its initial R&D to its final customer servicing and support
Locked-in costs – costs that have not yet been incurred but, based on decisions that have already been made, will be incurred in the future. Also called designed-in costs
Nonvalue-added cost – a cost that, if eliminated, would not reduce the actual or perceived value or utility (usefulness) customers obtain from using the product or service
Peak-load pricing – practice of charging a higher price for the same product or service when demand for it approaches the physical limit of the capacity to produce that product or service
Predatory pricing – company deliberately prices below its costs in an effort to drive out competitors and restrict supply and then raises prices rather than enlarge demand
Price discrimination – practice of charging different customers different prices for the same product or service
Product life cycle – spans the time for initial R&D on a product to when customer servicing and support is no longer offered for that product
Target cost per unit – estimated long-run cost per unit of a product or service that enables the company to achieve its target operating income per unit when selling at the target price. Target cost per unit is derived by subtracting the target operating income per unit from the target price
Target operating income per unit – operating income that a company aims to earn per unit of a product or service sold
Target price – estimated price for a product or service that potential customers will pay
Target rate of return on investment – the target annual operating income that an organization aims to achieve divided by invested capital
Value-added cost – a cost that, if eliminated, would reduce the actual or perceived value or utility (usefulness) customers obtain from using the product or service
Value engineering – systematic evaluation of all aspects of the value-chain business functions, with the objective of reducing costs while satisfying customer needs