Cost Accounting – 12^th Edition

Ch 19 Terms

Appraisal costs– Costs incurred to detect which of the individual units of products do not conform to specifications.

Average waiting time– The average amount of time that an order will wait in line before it is set up and processed.

Bottleneck – An operation where the work to be performed approaches or exceeds the capacity available to do it.

Cause-and –effect diagram – Diagram that identifies the potential causes of defects. Four categories of potential causes of failure are human factors, methods and design factors, machine-related factors, and materials and components factors. Also called a fishbone diagram.

Conformance quality – Refers to the performance of product or service relative to its design and product specifications.

Control chart– Graph of a series of successive observations of a particular step, procedure, or operation taken at regular intervals of time. Each observation is plotted relative to specified ranges that represent the limits within which the observations are expected to fall.

Costs of quality (COQ) – Costs incurred to prevent, or costs arising as a result of producing a low-quality product.

Customer-response time– Duration from the time a customer places an order for a product of service to the time the product or service is delivered to the customer.

External failure costs- Costs incurred on a defective product after it is shipped to customers.

Internal failure costs– Costs incurred on a defective product before it is shipped to customers.

Manufacturing cycle time– See manufacturing lead time.

Manufacturing lead time – Duration between the time an order is received by manufacturing to the time it becomes a finished good. Also called manufacturing cycle time.

On-time performance– Situations in which the product or service is actually delivered by the time it was scheduled to be delivered.

Pareto diagram– Chart that indicates how frequently each type of defect occurs, ordered from the most frequent to the least frequents.

Prevention costs– Costs incurred to preclude the production of products that do not conform to specifications.

Quality – Total features and characteristics of a product or a service made or performed according to specifications to satisfy customers at time of purchase and during use.

Theory of constraints (TOC)- Describes methods to maximize operating income when faced with some bottleneck and some nonbottleneck operations.

Throughput contribution- Revenues minus the direct materials cost of the goods sold.

Time driver- Any factor in which a change in the factor causes a change in the speed of an activity