Cost Accounting – 12th
Edition
Ch 5 Terms
Activity-based costing (ABC) – approach to costing that focuses on individual activities as the fundamental cost objects. It uses the costs of these activities as the basis for assigning costs to other cost objects such as products or services
Activity-based management (ABM) – management decisions that use activity-based costing information to satisfy customers and improve profitability
Cost hierarchy – categorization of costs into different cost pools on the basis of different types of cost drivers, or cost-allocation bases, or different degrees of difficulty in determining cause-and effect (or benefits received) relationships.
Facility-sustaining costs – the costs of activities that cannot be traced to individual products or services but support the organization as a whole
Output unit-level costs – the costs of activities performed on each individual unti of product or service
Product-cost cross-subsidization – costing outcome where one undercosted (overcosted) product results in at least one other product being overcosted (undercosted) in the organization.
Product overcosting – a product consumes a low level of resources but is reported to have a high cost per unit
Product-sustaining costs – the costs of activities undertaken to support individual products regardless of the number of units or batches in which the units are produced
Product undercosting – a product consumes a high level of resources but is reported to have a low cost per unit
Refined costing system – costing system that reduces the use of broad averages for assigning the cost of resources to cost objects (jobs, products, services) and provides better measurement of the costs of overhead resources used by different cost objects- no matter how differently the different cost objects use overhead resources.
Service-sustaining costs – the cost of activities undertaken to support individual services