Chapter 13: Cost Accounting and Reporting
direct cost
A cost directly related to a product or activity; the cost would not be incurred if the product or activity were discontinued
indirect cost
A cost that is indirectly related to the product or activity under consideration; the cost would continue to be incurred if the product or activity were discontinued
Cost Accounting
A subset of both financial and managerial accounting that relates to the accumulation and determination of product, process, or service costs
statement of cost of goods manufactured
A supplementary financial statement that supports cost of goods sold, which is an element of the income statement. This statement summarizes raw material, direct labor, and manufacturing overhead costs during the period.
raw materials inventory
An asset account that accumulates the costs of materials ready for the production process
period costs
Noninventoriable costs, including selling, general, and administrative expenses, that relate to an accounting period
manufacturing cost accounting system 3
Raw materials inventory Work in process inventory finished goods inventory
Value chain
The sequences of functions (R&D, design, production, marketing, distribution, and customer service) and related activities that, over the life of a product or service, creates value for the customer
process costing system
a costing system used to accumulate costs for a production process that is more or less continuous, frequently involving several departments
overapplied overhead
a credit balance in the manufacturing overhead account that results from applied overhead in excess of actual overhead costs
underapplied overhead
a debit balance in the manufacturing overhead account that results from actual overhead costs in excess of applied overhead
Job order costing system
a product costing system used when discrete products, or "jobs," are manufactured
manufacturing overhead
all manufacturing costs except those classified as raw materials or direct labor
work in process inventory
an asset account that accumulates the costs (raw materials, direct labor, and manufacturing overhead) of items that are in the process of being manufactured
cost object
any reference point for which cost is measured
cost pool
costs that have been accumulated for assignment to a cost object
direct labor
effort provided by workers who are directly involved in the manufacture of a product
finished goods inventory
holds the total cost of items manufactured that are now complete and available for sale
equivalent units of production
in a process costing system, the number of units that would have been produced if all production efforts during the period had resulted in completed products
product costs
inventoriable costs including raw materials, direct labor, and manufacturing overhead
raw materials
the ingredients of a product
cost assignment
the process of allocating an amount of cost to a cost object
Cost accumulation
the process of collecting and recording transaction data through the accounting system
Cost Management
the process of using cost information to assess and manage the activities of the organization
predetermined overhead application rate
the rate per unit of activity (direct labor hour) used to apply manufacturing overhead to work in process
