Administrative costs:
All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing, marketing, or selling.
Common costs:
A common cost is a cost that is common to a number of costing objects but cannot be traced to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. No part of the pilot's wage is caused by any one passenger taking the flight.
Conversion cost:
Direct labour cost plus manufacturing overhead cost.
Cost behaviour:
The way in which a cost reacts or responds to changes in the level of business activity.
Cost object:
Anything for which cost data are desired. Examples of possible cost objects are products, product lines, customers, jobs, and organizational sub-units such as departments or divisions of a company.
Cost of goods manufactured:
The manufacturing costs associated with the goods that were finished during the period.
Differential cost:
Any cost that differs between alternatives in a decision-making situation. In managerial accounting, this term is synonymous with avoidable cost and relevant cost. Also see Incremental cost.
Differential revenue:
The difference in revenue between any two alternatives.
Direct cost:
A cost that can be easily and conveniently traced to the particular cost object under consideration.
Direct labour:
Those factory labour costs that can be easily traced to individual units of product. Also called touch labour.
Direct materials:
Those materials that become an integral part of a finished product and can be conveniently traced into it.
Fixed cost:
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.
Incremental cost:
An increase in cost between two alternatives. Also see Differential cost.
Indirect cost:
A cost that cannot be easily and conveniently traced to the particular cost object under consideration.
Indirect Labour:
The labour costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced directly to any particular products.
Indirect materials:
Small items of material such as glue and nails. These items may become an integral part of a finished product but are traceable to the product only at great cost or inconvenience.
Inventoriable costs:
Synonym for Product costs.
Manufacturing overhead:
All costs associated with manufacturing except direct materials and direct labour.
Marketing or selling costs:
All costs necessary to secure customer orders and get the finished product or service into the hands of the customer.
Opportunity cost:
The potential benefit that is given up when one alternative is selected over another.
Period costs:
Those costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued; such costs consist of selling (marketing) and administrative expenses.
Prime cost:
Direct materials cost plus direct labour cost.
Raw materials:
Materials that are used to make a product.
Relevant range:
The range of activity within which assumptions about variable and fixed cost behaviour are valid.
Schedule of cost of goods manufactured:
A schedule showing the direct materials, direct labour, and manufacturing overhead costs incurred for a period and assigned to Work in Process and completed goods.
Strategic planning:
The planning that leads to the implementation of an organization's objectives. Such planning occurs in two phases: (1) deciding on the products to produce and/or the services to render, and (2) deciding on the marketing and/or manufacturing methods to employ in getting the intended products or services to the proper audience.
Sunk cost:
Any 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. A variable cost is constant per unit.
