Cost Accounting Concepts

A cost that can be readily traced to a specific item or activity.

A cost that's hard to trace to a specific item or activity.

Understanding and responding to individual customer needs.

Delivering products quickly and cheaply.

Offering high-quality products.

Raw materials directly used in a product.

Labor costs directly tied to specific products.

All manufacturing costs excluding direct materials & labor. Indirect costs.

Producing products only when needed, minimizing waste.

Identifying and managing risks proactively (by a company).

The revenue per unit minus the variable costs per unit.

A part of an organization (e.g., a store, sales territory, service center) for managers to track costs, revenues, and profits.

Financial report showing the revenues, costs, and profits for individual segments of a business.

Fixed costs that are directly related to a segment and disappear if the segment shuts down.

Fixed costs that are not directly tied to any single segment but support the entire business.

Departments that support the main operating activities of a company but don't directly engage in them. Their costs are charged to operating departments.

Costs that change proportionally with the level of activity used by operating departments. They're allocated based on the activity or cost driver.

Costs that remain constant regardless of the activity level of operating departments. They're allocated based on predetermined amounts.

To encourage efficient use of resources by operating departments, measure profitability more accurately, and provide better cost data for decisions.

A tool used by management to translate the company's strategic goals into measurable performance measures.

Measures the company's financial performance, including things like sales, profitability, and cash flow.

Measures how satisfied customers are, how many new customers are acquired, and how loyal they are.

Measures how efficiently the company's internal processes are operating, focusing on quality, innovation, and delivery time.

Measures the difference between the standard quantity of materials that should have been used for the actual output and the actual quantity of materials used. It's calculated solely on the quantity of materials used.

Measures the difference between the standard price of materials and the actual price paid for materials. It considers the entire quantity of materials purchased, even if some is unused.

Provides benchmarks for efficient operations, simplifies financial reporting, supports management by exception, and can encourage cost-consciousness.

Can become outdated, may not promote continuous improvement, can be misused for employee pressure, and may not reflect all important objectives.

Allows for greater autonomy and faster decision-making at lower levels, promotes employee experience and satisfaction, and can lead to improved customer service.

Can lead to lack of coordination, may overlook the 'big picture', and can make it harder to share new ideas across the organization.

A system where managers are held accountable for only the factors they can significantly control.

A segment within an organization where the manager has control over costs but not revenue.

A segment where the manager controls both costs and revenue.

A segment where the manager controls costs, revenue, and the investments made in operating assets.

Metrics that go beyond financial data, such as customer satisfaction, employee morale, or product quality, to assess an organization's performance.

Costs related to preventing or dealing with defects, including prevention, appraisal, internal failure, and external failure costs.

Expenses incurred to prevent defects from occurring, such as training employees or implementing quality control processes.

Costs associated with inspecting and testing products to identify defects before they reach customers, like final product testing or quality inspections.

Costs incurred when defects are discovered before products are shipped to customers, such as scrap, rework, or spoilage.

Costs arising from defects found after products are delivered to customers, such as warranty repairs, customer complaints, and lost sales.

A measure of how effectively a company uses its manufacturing time, calculated by dividing value-added time by manufacturing cycle time.

A metric that assesses the productivity of equipment, considering utilization, efficiency, and quality rates.

A business approach where organizations consider the needs of all stakeholders, not just shareholders, in their decision-making, going beyond financial performance.

The total of direct labor and manufacturing overhead, representing costs incurred to transform raw materials into finished products.

Costs associated with selling, general, and administrative activities, not directly involved in producing goods. Examples include advertising, salaries, and legal expenses.

Costs directly associated with acquiring or manufacturing a product, also known as inventoriable costs. They are 'attached' to each product until it's sold.

Costs that are not directly related to the production of goods, including selling and administrative expenses. They are expensed in the period they are incurred.

A cost that changes directly and proportionally with the level of activity. Examples include direct materials, commissions, and direct labor.

A cost that remains constant regardless of changes in activity level within a relevant range. Examples include rent, salaries, and depreciation.

A cost that contains both fixed and variable components. Example: Utility costs, which may have a fixed base charge plus variable usage charges.

How a cost reacts to changes in the level of activity. This helps in predicting and managing costs.

The relative proportion of fixed, variable, and mixed costs within a business. This affects profitability and risk.