Accounting Chp 16 & 17

Job order cost accounting system

Cost accounting system to determine the cost of producing each job or job lot.

Activity-based costing (ABC)

Cost allocation method that focuses on activities performed; traces costs to activities and then assigns them to cost objects.

Activity-based management

A management approach that focuses on managing activities as a way of eliminating waste and reducing delays and defects.

Activity overhead (pool) rate

A predetermined overhead rate in activity-based costing; each activity cost pool has its own activity rate that is used to apply overhead to products and services.

Value-added activities

Activities that add to the value of a product or service.

Batch level activities

Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in a batch; the amount of resources used depends on the number of batches run rather than on the number of units in the batch.

Unit level activities

Activities that arise as a result of the total volume of goods and services that are produced, and that are performed each time a unit is produced.

Facility level activities

Activities that relate to overall production and cannot be traced to specific products; costs associated with these activities pertain to a plant's general manufacturing process.

Product level activities

Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.

Activity

An event that causes the consumption of overhead resources in an entity.

Materials consumption report

Document that summarizes the materials a department uses during a reporting period; replaces materials requisitions.

Weighted-average method

Method to assign inventory cost to sales; the cost of available-for-sale units is divided by the number of units available to determine per unit cost prior to each sale that is then multiplied by the units sold to yield the cost of that sale.

Equivalent unit of production (EUP)

Number of units that would be completed if all effort during a period had been applied to units that were started and finished.

Process operations

Processing of products in a continuous (sequential) flow of steps.

Cost object

Product, process, department, or customer to which costs are assigned.

Process cost summary

Report of costs charged to a department, its equivalent units of production achieved, and the costs assigned to its output.

Lean accounting

System designed to eliminate waste in the accounting process and better reflect the benefits of lean manufacturing techniques.

Process cost accounting system

System of assigning direct materials, direct labor, and overhead to specific processes; total cost associated with each process are then divided by the number of units passing through that process to determine the cost per equivalent unit.

Activity cost pool

Temporary account that accumulates costs a company incurs to support an activity.

Conversion costs per equivalent unit

The combined costs of direct labor and factory overhead per equivalent unit.

Cost of goods manufactured

Total manufacturing costs (direct materials, direct labor, and factory overhead) for the period plus beginning goods in process less ending goods in process)

Activity cost driver

Variable that causes an activity's cost to go up or down; a casual factor.

FIFO Method

Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold.