A202 Chapter 2 definitions

Administrative Cost
All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling
Common Cost
A cost that is incurred to support a number of cost objects but that cannot be traced to them individually
Conversion Cost
Direct labor cost + Manufacturing Overhead Cost
Cost Behavior
The way in which a cost reacts to changes in the level of activity
Cost Object
Anything for which cost data are desired (products, customers, jobs, and parts of the organization such as departments or divisions)
Cost of Goods Manufactured
The manufacturing costs associated with the goods that were finished during the period
Differential Cost
A difference in cost between two alternatives
Differential Revenue
The difference in revenue between two alternatives
Direct Cost
A cost that can be easily and conveniently traced to a specified cost object
Direct Labor
Factory labor costs that can be easily traced to individual units of product
Direct Materials
Materials that become an integral part of a finished product and whose costs can be conveniently traced to it
Finished Goods
Units of product that have been completed but not yet sold to customers
Fixed Cost
A cost that remains constant, in total, regardless of changes in the level of activity within the relevant range
Incremental Cost
An increase in cost between two alternatives
Indirect Cost
An increase in cost between two alternatives
Indirect Labor
The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products
Indirect materials
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
Manufacturing Overhead
All manufacturing costs except direct materials and direct labor
Opportunity Cost
The potential benefit that is given up when one alternative is selected over another
Period Costs
Costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued
Prime Cost
Direct Materials Cost + Direct Labor Cost
Product Cost
All costs that are involved in acquiring or making a product
Raw Materials
Any materials that go into the final product
Relevant Range
The range of activity within which assumptions about variable and fixed cost behavior are valid
Schedule of Cost of Goods Manufactured
A schedule showing the direct materials, direct labor, and manufacturing overhead costs incurred during a period and the portion of those costs that are assigned to Work in Process and Finished Goods
Selling Costs
All costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer
Sunk Cost
A cost that has already been incurred and that cannot be changed by any decision made now or in the future
Variable Cost
A cost that varies, in total, in direct proportion to changes in the level of activity
Work in Process
Units of product that are only partially complete
Appraisal Costs
Costs that are incurred to identify defective products before the products are shipped to customers
External Failure Costs
Costs that are incurred when a product or service that is defective is delivered to a customer
Internal Failure Costs
Costs taht are incurred as a result of identifying defective products before they are shipped to customers
ISO 9000 Standards
Quality control requirements issued by the International Organization for Standardization that relate to products sold in European countries
Prevention Costs
Costs that are incurred to keep defects from occurring
Quality Circles
Small groups of employees that meet on a regular basis to discuss ways of improving quality
Quality Cost
Costs that are incurred to prevent defective products from falling into the hands of customers or that are incurred as a result of defective units
Quality Cost Report
A report that details prevention costs, appraisal costs, and the costs of internal and external failures
Quality of Conformance
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
Statistical Process Control
A charting technique used to monitor the quality of work being done in a workstation for the purpose of immediately correcting any problems