Chapter 1 Vocab Managerial Accounting 16e McGraw Hill Garrison, Noreen, Brewer – Flashcards
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Activity base
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A measure of whatever causes the incurrence of a variable cost. i.e. cost of surgical gloves increases as the number of surgeries increases, so # of surgeries is activity base
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Administrative costs
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All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling
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Committed fixed costs
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Investments in facilities, equipment, and basic organizational structure that can't be significantly reduced even for short periods of time without making fundamental changes
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Common cost
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A cost that is incurred to support a number of cost objects but that cannot be traced to them individually
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Contribution approach
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An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs
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Contribution margin
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The amount remaining from sales revenues after all variable expenses have been deducted
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Conversion cost
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Direct labor cost plus manufacturing overhead cost
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Cost behavior
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The way in which a cost reacts to changes in the level of activity
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Cost object
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Anything for which cost data are desired
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Cost structure
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The relative proportion of fixed, variable, and mixed costs in an organization
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Differential cost
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A future cost that differs between any two alternatives
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Differential revenue
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Future revenue that differs between any two alternatives
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Direct cost
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A cost that can be easily and conveniently traded to a specified cost object
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Direct labor
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Factory labor costs that can be easily traced to individual units of product. Also called touch labor
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Direct materials
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Materials that become an integral part of a finished product and whose costs can be conveniently traced to it
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Discretionary fixed costs
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Those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research
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Financial accounting
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The phase of accounting that is concerned with reporting historical financial information to external parties
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Fixed cost
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A cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity
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Finished goods
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Units of product that have been completed but not yet sold to customers
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Incremental cost
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An increase in cost between two alternatives
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Indirect cost
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A cost that cannot be easily and conveniently traced to a specified cost object
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Indirect labor
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The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products
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Indirect materials
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Small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it
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Managerial accounting
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The phase of accounting that is concerned with providing information to managers for use within the organization
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Manufacturing overhead
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All manufacturing costs except direct materials and direct labor
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Mixed cost
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A cost that contains both variable and fixed cost elements
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Opportunity cost
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The potential benefit that is given up when one alternative is selected over another
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Period costs
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Costs that are taken directly to the income statement as expenses in the period in which that are incurred or accrued
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Prime cost
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Direct materials cost plus direct labor cost
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Product cost
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All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead. Also called inventoriable costs
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Raw materials
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Any materials that go into the final product
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Relevant range
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The range of activity within which assumptions about variable and fixed cost behavior are valid
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Selling costs
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All costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer
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Sunk cost
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A cost that has already been incurred and that cannot be changed by any decision made now or in the future
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Variable cost
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A cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant per unit
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Work in process
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Units of product that are only partially complete and will require further work before they are ready for sale to the customer
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Quality of Conformance
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The degree to which a product or service meets or exceeds its design specifications and is free of defects or other problems that mar its appearance or degrade its performance
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Prevention costs
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Costs that are incurred to keep defects from occurring
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Appraisal costs
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Costs that are incurred to identify defective products before the products are shipped to customers
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Internal failure costs
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Costs that are incurred as a result of identifying defective products before they are shipped to customers
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External failure costs
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Costs that are incurred when a product or service that is defective is delivered to a customer
