Cost Accounting – 12^th Edition

Ch 23 Terms

Belief system –

Boundary system –

Current cost – Asset measure based on the cost of purchasing an asset today identical to the one currently held, or the cost of purchasing in asset that provides services like the one currently held if an identical one cannot be purchased.

Diagnostic control system -

Economic value added (EVA) – After-tax operating income minus the (after-tax) weighted average cost of capital multiplied by total assets minus current liabilities.

Imputed costs – Costs recognized in particular situations that are not usually recognized in financial accounting systems.

Interactive control system -

Investment – Resources or assets used to generate income.

Moral hazard– Describes situations in which an employee prefers to exerts less effort (or report distorted information) compared with the effort (or accurate information) desired by the owner because the employee’s effort (or validity of the reported information) cannot be accurately monitored and enforced.

Residual income (RI) – Accounting measure of income minus a dollar amount of required return on an accounting measure of investment.

Return on investment (ROI) – An accounting measure of income divided by an accounting measure of investment. See also accrual accounting rate of return.