Cost Accounting – 12^th Edition

Ch 2 Terms

Actual cost – cost incurred (a historical cost), as distinguished from a budgeted or forecasted cost

Average cost – see unit cost

Budgeted cost- Predicted or forecasted cost (future cost) as distinguished from an actual or historical cost.

Conversion costs – all manufacturing costs other than direct material costs

Cost – resource sacrificed or forgone to achieve a specific objective.

Cost accumulation – collection of cost data in some organized way by means of an accounting system

Cost allocation – the assignment of indirect costs to a particular cost object

Cost assignment – general term that encompasses both (1) tracing accumulated costs that have a direct relationship to a cost object, and (2) allocating accumulated costs that have an indirect relationship to a cost object

Cost driver – a variable, such as the level of activity or volume that causally affects costs over a given time span

Cost object – anything for which a measurement of costs is desired

Cost of goods manufactured – cost of goods brought to completion, whether they were started before or during the current accounting period

Cost tracing – describes the assignment of direct costs to the particular cost object

Direct costs of a cost object – costs related to the particular cost object and can be traced to that object in an economically feasible (cost-effective) way

Direct manufacturing labor costs – include the compensation of all manufacturing labor that can be traced to the cost object (work in process and then finished goods) in an economically feasible way

Direct material costs – acquisition costs of all materials that eventually become part of the cost object (work in process and then finished goods), and that can be traced to the cost object in an economically feasible way

Direct materials inventory – direct materials in stock and awaiting use in the manufacturing process

Factory overhead costs – see indirect manufacturing cost

Finished-goods inventory – goods fully completed but not yet sold

Fixed cost – cost that remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume.

Idle time – wages paid for unproductive time caused by lack of orders, machine breakdowns, material shortages, poor scheduling, and the like

Indirect costs of a cost object – costs related to the particular cost object but cannot be traced to that object in an economically feasible (cost-effective) way

Indirect manufacturing costs – all manufacturing costs that are related to the cost object (work in process and then finished goods) but that cannot be traced to that cost object in an economically feasible way

Inventoriable cost – all costs of a product that are regarded as assets when they are incurred and then become cost of goods sold when the product is sold

Manufacturing overhead costs – see indirect manufacturing costs

Manufacturing-sector companies – companies that purchase materials and components and convert them into various finished goods

Merchandising-sector companies – companies that purchase and then sell tangible products without changing their basic form

Operating income – total revenues from operation minus cost of goods sold and operating cost (excluding interest expense and income taxes)

Overtime premium – wage rate paid to workers (for both direct labor and indirect labor) in excess of their straight time wage rates

Period costs – all costs in the income statement other than cost of goods sold

Prime cost – all direct manufacturing costs

Product cost – sum of the costs assigned to a product for a specific purpose

Relevant range – band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question

Revenues – inflows of assets (usually cash or accounts receivable) received for products or services provided to customers

Service-sector companies – companies that provide services or intangible products to their customers

Unit cost – cost computed by dividing some amount of total costs by the related number of units

Variable cost – cost that changes in total in proportion to changes in the related level of total activity or volume

Work-in-process inventory – goods partially worked on but not yet fully completed

Work in progress – see work-in-process inventory