Market Exam

Indirect Labor

The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.

discretionary fixed costs

Those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research.

Period Costs

costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued

Direct cost

A cost that can be easily and conveniently traced to a specified cost object.

Indirect cost

A cost that cannot be easily and conveniently traced to a specified cost object.

Fixed Cost (FC)

A cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity.

variable costs

A cost that varies, in total, in direct proportion to changes in the level of activity. A variable cost is constant per unit.

Product Costs

All costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead.

Administrative costs

All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling.

Raw Materials

Any materials that go into the final product.

Mixed Costs

Costs that contain both a variable- and a fixed-cost element and change in total but not proportionately with changes in the activity level.

Direct Labor

Factory labor costs that can be easily traced to individual units of product. Also called touch labor.

committed fixed costs

Investments in facilities, equipment, and basic organizational structure that can't be significantly reduced even for short periods of time without making fundamental changes.

Direct Materials

Materials that become an integral part of a finished product and whose costs can be conveniently traced to it.

Indirect Materials

Small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it.

activity base

a measure of whatever causes the incurrence of a variable cost

selling costs

all costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer

Manufacturing Overhead

all manufacturing costs except direct materials and direct labor

inventoriable costs

synonym for product costs

opportunity cost

whatever must be given up to obtain some item