Actual Cost (p 27) Cost incurred (historical or past cost) Average Cost (p 35) AKA unit cost Total

cost/number of units= average cost Budgeted cost (p 27) A predicted or forecasted cost (future cost) Conversion costs (p 43) All manufacturing costs other than DM CC = DManufacturing labor costs + MOH costs Cost (p 27) A resource sacrificed or forgone to achieve a specific objective Cost accumulation (p 28) The collection of cost data in some organized way by means of an accounting system Used for making decisions and implementing decisions Cost allocation (p 29) The assignment of indirect costs to a particular cost object Cost assignment (p 29) A general term that encompasses both: (1) tracing direct costs to a cost object (2) allocating indirect costs to a cost object Cost driver (p 32) A variable, such as the level of activity or volume that causally affects costs over a given time span Cost object (p 27) Anything for which a measurement of costs is desired Cost of goods manufactured (p 41) The cost of goods brought to completion, whether they were stated before or during the current accounting period Cost tracing (p 28) The assignment of direct costs to a particular cost object Direct costs of a cost object (p 28) Related to the particular cost object and can be traced to it in an economically feasible (cost effective) way

Direct manufacturing labor costs (p 37) Include the compensation of all manufacturing labor that can be traced to the cost object (work in process and then finished goods) but cannot be traced to that cost object in an economically feasible way Ie -- wages and fringe benefits paid to assembly line workers and machine operators who convert direct materials purchased to finished goods Direct material costs (p 37) The acquisition costs of all materials that eventually become part of the cost object (work in process and then finished goods) and can be traced to the cost object in an economically feasible way Ie -- freight-in charges, sales taxes, custom duties Direct materials inventory (p 37) Direct materials in stock and awaiting use in the manufacturing process Factory overhead costs (p 37) See Indirect manufacturing costs/MOH Finished goods inventory (p 37) Goods completed, but not yet sold Fixed cost (p 30) Remains unchanged in total for a given time period, despite wide changes in the related level of total activity or volume Costs are defined as variable or fixed with respect to a specific activity and for a given time period FC = total fixed costs / number of units produced Ex: fixed supervision cost for BMW= annual total fixed supervision costs for BMW X5 assembly line X5 assembly line Number of X5's produced Idle time (p 45) Wages paid for unproductive time caused by lack of orders, machine or computer breakdowns, work delays, poor scheduling, etc Indirect costs of a cost object (p 28) Related to the particular cost object but cannot be traced to it in an economically feasible (cost effective) way Needs to be allocated --> costs drivers Indirect manufacturing costs (p 37) AKA MOH & FOH All manufacturing costs that are related to the cost object (work in process and then finished goods) but cannot be traced to that cost object in an economically feasible way Ie-- supplies, indirect materials such as lubricants, indirect manufacturing labor such as plant maintenance and cleaning labor, plant rent/insurance/property taxes/depreciation, and the compensation of plant managers

Inventoriable costs (p 37) All costs of a product that are considered as assets in the balance sheet when they are incurred and that become COGS only when the product is sold Manufacturing overhead costs (p 37) See Indirect manufacturing costs/FOH

Manufacturing-sector companies (p36) Purchase materials and components and convert them into various finished goods Merchandising-sector companies (p 36) Purchase and then sell tangible products without changing their basic form Operating income (p 42) OI = total revenues from operations - COGS - operating (period) costs (excluding interest expense and income taxes) Or, OI = gross margin - period costs Gross margin = revenues - COGS Overtime premium (p 44) The wage rate paid to workers (both direct and indirect labor) in excess of their straight-time wage rates Usually a part of indirect costs or overhead Period costs (p 38) All costs in the income statement other than COGS Ie-- marketing, distribution, customer service For manufacturing co's - all non manufacturing costs ie--design costs, shipping Treated as expenses of the accounting period in which they are incurred bc they are expected to benefit revenues in that period and not future ones Prime costs (p 43) All direct manufacturing costs PC = DM costs + DManufacturing labor costs Product cost (p 45) The sum of the costs assigned to a product for a specific purpose Relevant range (p 33) Is the band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question Revenues (p 38) Inflows of assets (usually Cash and A/R) received for products or services provided to customers

Service-sector companies (p 36) Provide services (intangible products) -- ie legal advice, audits Unit cost (p 35) AKA average cost Total cost/number of units=unit cost Variable cost (p 30) Changes in total in proportion to changes in the related level of total activity or volume Costs are defined as variable or fixed with respect to a specific activity and for a given time period VC = number of units produced x variable cost per component Ex: VC of steering wheels = number of BMW X5's produced x variable cost per steering wheel Work-in-progress inventory/Work in process (p37) Goods partially worked on but not yet completed