Terms in Cost accounting

1. 2.

Actual cost - Expenses incurred in setting up a machine, work center, or assembly line, to switch from one production job to the next. Administrative costs are all executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing, marketing, or selling.

3. Actual Cost - An amount determined on the basis of cost incurred

including standard cost properly adjusted for applicable variance. 4. Applied overhead
5. 6. 7.
After-Tax Cost The amount of net cash outflow resulting from a tax-deductible cash
expense after income tax effects have been considered. The amount is determined by multiplying the tax-deductible cash expense by (1 - Tax rate).

Appraisal Cost Definition:Costs that are incurred to identify defective products before
the products are shipped to customers.

Avoidable cost Any cost that can be eliminated (in whole or in part) by choosing one alternative over another in a decision-making situation. In managerial accounting, this term is synonymous with Relevant cost and differential cost.

8. Batch level cost 9. Carrying cost 10.Committed cost 11.Common cost is a cost that is common to a number of costing objects but
cannot be traced to them individually.

12.Controllable costs are those that can be influenced by the manager. That is, costs within a
managers control can be modified by the manager. He or she is responsible for monitoring the cost and to some extent, can modify it by spending more or less money on it.

13.Conversion cost is equal to direct labor cost plus manufacturing overhead cost. (book) 14.Cost of Capital - The overall cost to an organization of obtaining investment funds,
including the cost of both debt sources and equity sources.

15.Cost of compliance 16.Cost of noncompliance 17.Cost of goods available for sale - this is the sum of the beginning inventory
of merchandise plus the net cost of the merchandise purchased including freight-in.

18.Cost of goods manufactured is the manufacturing costs associated with the

goods that were finished during the period.

19.Cost of goods sold, COGS, or "cost of sales", includes the direct costs

attributable to the production of the goods sold by a company. Figure representing the cost of buying raw materials and producing finished goods.

20.Cost of goods purchased - For a merchandiser this is the cost of merchandise

purchased after deducting purchase returns, purchase allowances, and purchase discounts but after adding freight-in.

21.Curvilinear Costs Definition:A relationship between cost and activity that is a curve
rather than a straight line.

22.Committed fixed costs are those fixed costs that are difficult to adjust and that relate to
the investment in facilities, equipment, and the basic organizational structure of a firm.

23.Conversion cost - Direct labor and factory overhead are conversion

costs. Abnormal loss.

24.Depreciation is allocation of the cost of property, plant, and equipment to expenses

over their useful (economic) life in a systematic and rational manner.

25.Differential Cost Definition:Any cost that differs between alternatives in a decisionmaking situation. Inmanagerial accounting, this term is synonymous with avoidable cost andrelevant cost. Also see Incremental cost.

26.Direct cost is the cost that can be easily and conveniently traced to the
particular cost object under consideration.

27.Direct labor costs are those factory labor costs that can be easily traced to
individual units of product. Also called touch labor.

28.DM Those materials that become an integral part of a finished product and
can be conveniently traced into it.

29.Discretionary cost 30.Discretionary fixed costs are those fixed costs that arise from annual decisions by management to spend in certain fixed cost areas, for example advertising and research. 31.Distribution cost 32.Downstream cost 33.Engineered cost 34.Estimated Cost - The process of projecting a future result

in terms of cost, based on information available at the time. Estimated costs, rather than actual costs, are sometimes the basis for credits to work-in-process accounts and debits to finished goods inventory. 35.Expired cost
36.External Failure cost - Costs that are incurred when a product or service that is defective is delivered to a customer. 37.Failure cost

38.Fixed Costs - If more units are produced (i.e., activity increases), fixed cost per unit declines.
Total fixed costs remain the same no matter how many units are produced and sold.

39.Fixed overhead p 36 40.Fixed manufacturing overhead applied - The fixed manufacturing costs (e.g.,
property tax, rent, and depreciation on factory) that have been assigned to (aborbed by) the products manufactured via a predetermined rate. Ideally, by the end of the accounting year the amount applied will equal the amount actually incurred. 41.Fixed manufacturing overhead incurred - The actual cost incurred for manufacturing costs that does not change as production volume changes. Examples include the property tax, rent, and depreciation of the factory building and equipment, and the salaries of the manufacturing management.

42.Full Cost - The sum of all costs required by a cost object including the

costs of activities performed by other entities regardless of funding sources. 43.Historical cost - The original cost incurred to acquire an asset (as
opposed to replacement cost, current cost, or cost adjusted by a general price index). 44.Holding cost - In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.

45.Incremental costs differ between decision alternatives. They are often called relevant costs
because they have a connection to the decision that is being considered.

46.Indirect cost is a cost that cannot be easily and conveniently traced to the particular cost object under consideration. 47.Indirect labor - The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced directly to particular products. 48.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. 49.Indirect manufacturing cost - Also referred to as manufacturing overhead,
factory burden, factory overhead, and manufacturing support costs. 50.Internal Failure cost - Costs that are incurred as a result of identifying defective
products before they are shipped to customers.

51.Inventoriable cost page 29

52.Irrelevant cost - A managerial accounting term that represents a cost, either positive or
negative, that does not relate to a situation requiring management's decision.

53. joint cost 54.Maintenance cost - Maintenance cost typically includes the cost of labor and parts to perform repairs 55.Manufacturing cost - Cost to a manufacturing company of making a product
consisting of direct materials, direct labor, and factory overhead

56.Manufacturing overhead - All costs associated with manufacturing except direct

materials and direct labor.

57.Mixed cost - A cost that contains both variable and fixed cost elements. 58.Non-controllable costs cannot be influenced by the manager. A manager of a department has no
control over the salary of the vice president of the company.

59.non-manufacturing costs - All the costs incurred by a

manufacturing company other than the cost of factory operations.

60.Normal loss page 155 61.Normal spoilage - Spoilage or waste that is likely to occur and cannot be
avoided at a reasonable cost.

62.Opportunity cost is an amount or benefit given up as a result of choosing a particular course of

action.

63.Ordering cost 64.Organizational-level cost 65.Overhead 66.Period costs are not part of inventory and are not related to the production of goods. 67.Prevention costs are those costs that are incurred to keep defects from occurring. 68.Prime cost is equal to total direct materials cost plus direct labor cost. 69.Product costs are inventoriable and are related to the production of goods. 70.Product-level (process-level) cost 71.Product warranty cost - The cost of repairing or replacing previously sold
products during their warranty periods.

72.Purchasing cost 73.Quality costs - 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. There are four major types of quality cost. These are appraisal cost, prevention cost, internal failure cost, and external failure cost.

74.Raw materials - Materials that are used to make a product. A finished product of a firm
can be a raw material for another firm. For example plastic is a finished product for the

manufacturer of plastic but raw material for manufacturers of computers who use plastic to make casings of computers.

75.Relevant cost - A managerial accounting term that is used to describe costs

that are specific to management's decisions. The concept of relevant costs eliminates unnecessary data that could complicate the decision-making process.

76.Research and development cost cost incurred from creative works undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications 77.Relevant cost - A cost that differs between alternatives in a particular decision. In
managerial accounting, this term is synonymous with avoidable cost and differential cost.

78.Selling cost - The total cost of marketing, advertising, and selling a product. 79.Separate cost 80.Setup cost - Expenses incurred in setting up a machine, work center, or assembly
line, to switch from one production job to the next.

81.Standard cost - Expenses incurred in setting up a machine, work center,

or assembly line, to switch from one production job to the next.

82.Standard cost per unit - The standard cost of a unit of product as shown on the standard
cost card; it is computed by multiplying the standard quantity or hours by the standard price or rate for each cost element.

83.Step cost 84.Step variable costs - A cost (such as the cost of a maintenance worker) that is obtainable
only in large chunks and that increases and decreases only in response to fairly wide changes in the activity level.

85.Sunk costs are amounts incurred in the past. They exist no matter what decision alternative you
make and will be the same under either decision.

86.Support Costs - Costs of activities not directly associated with

production. Typical examples are the costs of automation support, communications, postage, process engineering, and purchasing 87.Target cost - Final cost of a product or service that must be achieved in order to
generate the desired level of sales revenue and income.

88.Total cost to account for 89.Traceable fixed cost - A fixed cost that is incurred because of the existence of a
particular business segment.

90.Transferred-in cost - The cost transferred from one department to the next
department in a process costing system.

91.Transportation-in expenditures are cost incurred to delivery inventory from the

vendor (supplier) to the company. Transportation-in costs are treated as part of the inventory costs (product costs).

92.Transportation-out expenditures are expenses incurred to deliver products from

the company to the customer. Transportation-out expenditures are treated as period costs and expensed in the period of occurrence.

93.Uncontrollable Cost - The cost over which a responsible manager has

no influence 94.Unexpired cost 95.Unit-level Cost 96.Upstream cost

97.Variable Costs - Total variable costs change in direct proportion to changes in activity. 98.Variable overhead page 36 99.Warehousing cost - Warehousing costs are levied by the warehouse
owners and are an unavoidable expense for the companies that use the space. The owners should be conversant with the applicable charges.

100. Whole-life cost, or Life-cycle cost (LCC), refers to the total cost of ownership over the life of an asset