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What two techniques are designed to support large expensive items, customized, special order, small lots OR large batch, homogeneous production?
Job Order & Process Costing
What is Job Order Costing?A costing technique that supports large expensive heterogenous items, customized special order, individual or small lots
What is Process Costing? A costing technique that supports large batches, homogeneous products
In a job order cost system, where are costs accumulated? In an individual WIP acct (job order cost sheet)
What is done with the total for individual WIP accts under the job order cost system?
The totals are transferred to the WIP control acct
What's the process of a job order cost system?
1. Accumulate costs in an individual WIP acct at the actual costs.2. Tsfr the total from the individual WIP acct to the WIP ctrl acct.3. Apply FO. Charge to WIP ctl and FOA at the std costs.4. In over or under amts in WIP is decreased from or charged to CGS.5. Costs flow from FG to CGS.
What is the acronym utilizing the job order cost system?
A Accumulate costsT Tsfr totalA Apply FOC Costs flow
What's the main issue in process costing?Since costs of goods are not individually tracked, the problem lies in determining how many units were products for the period and assigning a cost to them.
9 Cards in this Set
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Direct materials, direct labor, and overhead Manufacturing cost
Selling cost and administrative expenses Nonmanufacturing cost
Capitalized as part of finished goods inventory Product cost
Expensed as incurred Period cost
Future cost that will vary depending on action taken. All other cost are assumed to be constant and thus have no effect on decision
Relevant cost
Cost either already paid or irrevocably committed to incur Sunk cost
Joint products acquire separate identities Split-off point
Allocates joint production cost to each product based on its relative proportion of measure selected
Physical-quantity method
Assigns a proportionate amt of total cost to each product on quantitative basis
Market-based approach
Based on relative sales values of separate products at split-off Sales-value at split-off method
Costs incurred prior to the split-off point to produce two or more goods manufactured simultaneously by a single process or series of processes
Joint cost
Consist of direct materials and direct labor Prime cost
Selling price minus selling and disposal costs Net realizable value
Includes fixed factory overhead in finished goods inventory Absorption costing
Consists of direct labor and overhead Conversion cost
Costing includes variable manufacturing costs only: direct materials, direct labor, and variable manufacturing overhead
Variable (direct) costing
Breakeven in Units Fixed Cost/ Unit contribution Margin
Breakeven in Dollars Fixed Cost/Contribution Margin ratio
Measures the amount by which sales may decline before losses occur Margin of safety
14 Cards in this Set
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Each end product is unique (construction/shipbuilding/plumbing) Job-order costing
Used to assign cost to inventoriable goods or services. (homogeneous products)
Process cost
Number of complete goods that could have been produced using inputs consumed during the period
Equivalent units of production (EUP)
Weighted average method calculating EUPBeginning WIP - treated as if they were started & completed during current period (not included in EUP calculation)
FIFO method when calculating EUP Beginning WIP are part of EUP
Indirect cost are attached to activities that are rationally allocated to end products
Activity-Based Costing
3 methods of service department allocation1. Direct method2. Step or step down 3. Reciprocal method
Foundation of any performance evaluation system based on standard cost
Variance Analysis
Price Variance formula Actual Quantity * (Standard Price- Actual Price)
Efficiency Variance Standard Price * (Standard Quantity - Actual Quantity)
Overhead allocation rateEst. total overhead cost/Est. total units of allocation base
Allocates cost directly to production departments - only production units Direct Method
Allocates some service departments' cost to each other Step method
Allocates services that all service departments render to each other Reciprocal method
12 Cards in this Set
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Cost management systemSystem to provide information about the cost of process, products, and services used and produced by an organization.
Cost Systems should have
1) Cost Systems should have a decision focus.
2) Different cost information is used for different purposes.
3) Cost information for managerial purposes must meet the cost-benefit test.
Predetermined overhead rate Estimate overhead/Estimated allocation base
Two stage cost allocationProcess of first allocating costs to intermediate cost pools and then to individual cost objects using different allocation bases.
job unit of product that is easily distinguished from other units
continuous flow processingsystem that mass-produces a single, homogenous output in a conituning process
job costing
accounting system that traces costs to individual units or to specific jobs, contracts, or batches of goods.
ie. construction, consulting, hospitals
process costing
accounting system used when identical units are produced through a series of uniform production steps
ie. Pertroleum, Paint
operation costing
Hybrid costing system often used in manufacturing goods that have some common characteristics plus some individual characteristics
ie. Clothing, Automobile, Furniture
operation standarized method or technique that is repetively performed.
overhead as a percentage of labor costs overhead related to direct labor/ direct labor costs
Watch Allocation Base!!, Make sure to convert to labor hours etcetraIf units are produced are given, multiply by labor hours used for to produce units to get total labor hours!
9 Cards in this Set
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Purchased raw materials costing $2,500 on account.Raw Materials 2,500Accounts Payable 2,500
Requisitioned materials costing $1,500 for use in production.Work in Process 1,500Raw Materials 1,500
Recognized direct labor costing $1,530.Work in Process 1,530Wages Payable 1,530
Applied overhead to production at the rate of $4 per direct labor hour. A total of 85 direct labor hours were worked.
Work in Process 340Overhead Control 340
Incurred actual overhead costs of $415.00
Overhead Control 415Lease Payable 200Utilities Payable 50Acc Depreciation 100Wages Payable 65
Completed a job and transferred it to Finished Goods.Finished Goods 2,320Work in Process 2,320
Sold the job at cost plus 50%.
Cost of Goods Sold 2,320Finished Goods 2,320
Accts Receivable 3,480Sales Revenue 3,480
Closed underapplied overhead to Cost of Goods Sold.Cost of Goods Sold 75Overhead Control 75
Closed overapplied overhead to Cost of Goods Sold.Overhead Control 75Cost of Goods Sold 75
5 Cards in this Set
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List and describe the 5 components of Management Accounting
- Cost element accounting. Classifies costs and revenues.- Overhead cost controlling. Includes costs that cannot be directly assigned to a product or service. Includes activity-based costing (ABC)- Product cost accounting. Evaluates cost of goods and value-adding processes.- Profitability analysis. Examines effect of the external market.- Profit center accounting. Analyzes the success of profit centers.
_____ is a primary source of data for management accounting. Financial accounting
_____ is a primary source of data for profitability analysis and profit center accounting.
Sales order management
_____ created in Management Accounting can update price fields in material master records.
Product cost estimates
_____ and _____, created in Manufacturing, can be used in Product Cost Accounting
- BOMs- routings
0 Cards in this Set
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3rd side (hint)
What is Job Order Costing?
A costing technique used to accumulate costs related to the production of large, expenseive, homogeneous (custom) items. -- Can be used for Service items.
Costing Technique, accumulate costs
Describe the process of accumulating costs in a job order costing system.
1. The costs are accumulated in individual WIP accounts, also called job order cost sheets. The TOTAL of each job (WIP acct) is transferred to the WIP-Control account.
2. Overhead is applied based on a predetermined rate
3. When job is complete, the total cost is transferred to Finished Goods.
4. When sold, costs flow to CGS.
Accumulates and flows thru four general areas
In the job order costing, how is "Cost of Goods Completed" calculated?
Use the same method as used when calculating CGS.
+ Beg WIP+ DM+ DL+ FOA= Tot Manuf Cost to Acct For- E WIP= Cost of Goods Completed (manuf)
What is Cost of Goods Completed?It is the same as the Cost of Goods Manufactured.
What is Factory Overhead Applied (FOA)? It is the estimated overhead for the period. This amt is calc at the beg of the period and then charged to WIP. Actual Overhead costs are kept separately and expensed. Any difference between applied and actual is under or overapplied overhead. Under/Over
applied overhead is charged to WIP and when sold, to CGS.
How is Factory Overhead calculated?By applying the PDRate to the actual activity units used in production.
What is the calculation for the predetermined rate for overhead?
PDR = Est Tot Manf Cost/Est Norm Activity Volume
* The estimates must be based on attainable standards.
What is Process Costing?A costing technique used to accumulate costs for mass-produced, continuous, homogeneous items which are often small and inexpensive.
Costing technique, accumulates costs
What is the problem that occurs with process costing?
Since costs are not accumulated for individual items the problem becomes one of TRACKING the # of units moving thru WIP into FG and allocating the costs incurred to these units on a rational basis.
What complicates the process costing?
1. There may be partially completed goods in beg and end inventories.
2. Each of the 3 factors of production (DM, DL, FO) may be at different levels of completion.
3. Some costs do not occur uniformly across the process; esp DM.
4. There are two methods for calculating "equivalent units," FIFO and Weighted Avg. (These are not the same as the cost flow assumptions in financial acctg0
4 things
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Standard The brenchmarks that we will use to compare the actual result with.
Standard costEstimated cost to manufacture a unite of product or a service. Includes component of material, labour, and overhead.
Standard cost systemA production costing method that use budget cost per unit.- Can use with job order or process costing system to provide information for planning, controlling, and decision.
Challenges faced by non-manufacturing business
- Standard cost largely depends the type of the business.- BUT non-manufacturing business is hard to identify their types. => Thus, it is hard to identify an allocation to allocate the overhead, for example.
Standard cost is used in planning, decision making, and performance evaluation & control.
- Decision making: with budgeted cost, we can make decision on projects more quickly with forseeing the expectation.- By using the variance between actual and budgeted cost, we can correct the problem of exceeding usage and cost more easily to improve the operation performance-for planning, we can estimate how many quantity, and price for a project.
Variance difference btw actual and standard costs or quantities.
Requirements to create standard cost system
- Judgement and practicality to identify the type of materials and labour to use, and it quantity and price.- classification of cost according to cost behaviour, valid allocation bases, and a measureable level of activity.
material standards
-the specific direct material to use to manufacturing are required to be identified or listed.- Quality of the material required- Quantities needed.
=>All should be clearly defined
-estimations are based on the engineering tests, opinion of people using the materials, and historial data
=> Price will be determined by the purchasing agent who has expertise to estimate standard price
Bill of materialsA document that contains information about product material components, quality of the material, and quantity required for production.
Labour standards
(1) Identify a list of task for labour;(2) Prepare the operations flow document that include all tasks to make a product or a service(3) help to identify any non-value added activities for elimination(4)Labour rate standards should reflect the wages and fringe benefits
Labour fringe benefitsemployee-related cost paid by employer will be treated on MOH, or DL. Insurance program or retire plan etc.
operations flow document a list of all tasks that will require to make a product or a service
overhead standard rates classification contain predetermine overhead rate that can be classified by:1) Single plant rate2) Multiple department rate
3) fixed cost rate4) variable cost rate
standard cost carda document contains summary of DM's and DL's standard quantities and prices to complete one product or services. And the standard rate and base for manufacturing overhead.
Normal costing system use actual DL, DM, and estimated MOH
actual costing system use actual DL, DM, and MOH
Price varianceFixed AQ, find (AP-SP) => During the period, what was the actual price paid which is different from what the price should be.
Quantity varianceWith SP fixed, find (AQ-SQ)=> During the period, it measures the difference of the quantity of actual input and the standard quantity of input allowed for the actual output.
Q = quantity => How it represents?define x as # of quantities used in each unit and there is total S units=> Then total quantity, Q = xS
standard quantity allowedstandard quantity of input that should have been used to achieve the actual level of output
favourableF = below the standard or above the standard => depend on the situation=> but it means more efficient
unfavourableU = above the standard or below the standard=> depend on the situation=> less efficient
variance model
AQxAP------AQxSP------SQSP| |v v Price var. Quantity var.
Material variance
If Q_p = Q_u, use normal variance model
Else
we require to seperate the model into two parts [this is called point of purchase material variance model]:
AQ_pxAP-AQ_pxSP [purchase] ||VV[used] AQ_uxSP--SQ_uxSP
*Note: variance cannot be added since AQ_p != AQ_u
Material price variance
AQ_pxAP-AQ_pxSP [purchase]
=> Difference between amount of money spent above[U] or below [F] for the actual quantity of material purchased.
material quantity variancethe cost saved or expanded because of the difference between actual material used and standard material allowed for actual output produced.
Point of purchase material variance model
Two cases:(1) Material purchase (2) Material used
Since materials can be stored, Q_p is possibly different from Q_u
Labour variance
Two variance:(1) labour rate variance (r)(2) labour efficiency var (e)
ARxAH-(1)-SRxAH-(2)-SRxSH
Total variance of point of purchase material model can be added or not? No. Because Q_p != Q_u, we cannot add the two variance up.
Labour rate varianceThe difference due to the total actual labour wages and standard labour rate for the actual labour hours during the period
Labour efficieny varianceThe diffence between the actual direct labour hours and the standard allowed labour hours for the actual output multiply by the standard labour rate per hour.
Labour efficiency variance with defective products
If we have defective products, then our SQ should be calculated as [total - defective]*(Standard hours per unit)
Then, our SPxSQ will be reduced, so that we can compare the variance with a tighter bound to reflect the defective products(P.272)
Variable overhead variance
Two cases:(1) VOH spending variance(2) VOH efficiency variance
AD = divers = DLH usually if labour intensive
ARxAD-(1)-SRxAD-(2)-SRxSD
VOH spending varianceThe diffence between total actual VOH and the budget VOH based on actual input.
VOH efficiency varianceThe difference between "budgeted" variable overhead at actual input activity, and the "standard" variable overhead at standard input activity allowed.
Fixed overhead varianceTwo cases:(1) FOH spending variance(2) FOH volume variance
over(under)applied VOH varianceIf F, actual < applied, then overapplied VOH
If U, actual > applied, then underapplied VOH
FOH spending variance The diffence between actual FOH and budgeted FOH.
FOH volume varianceThe difference between budgeted FOH and the applied fixed OH (i.e. standard FOH rate times standard input allowed =[standard Q per unit x actual units ])
Standard FOH rateUsed annual data:= Budgeted fixed overhead/ Budgeted level of activity i.e. budgeted quantity
FOH volumn variance (2)
If standard input allowed < budgeted level of activity [i.e. the denominator of standard FOH rate], then it means standard input allowed is less efficient than budgeted => Unfavourable
e.g. budgeted MH = 100, andactual MH for standard input allowed = 20. And MH implies productivity. Thus, SIA < budgeted [expected], we are less efficient
33 Cards in this Set
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ABC stands for _____ Activity based costing
What does ABC mean?
ABC is a system that (1) Accumulates overhead costs for each of the activities (2) then assigns costs of activities to the products/ services that causes the activities
=> it is a system that generate costing information for overhead
ABC mainly for? Allocate overhead cost or indirect cost in a more accurate manner.
ABM stands for _____ Activity based management
What does ABM do?
A discipline:
=> analysis the activities in production / performance process
=> use the results to improve values received by customers and hence increase company's profit.
Relationship of ABC & ABMABM used ABC costing information to improve values of products/ services to customers
What is ABM umbrella?
Show all overlap displines in the organization with ABM
such as ABC, Strategic planning, performance evaluation, reengineering etc.
How ABM helps managers?
Managers can use ABM to (i)increase values for customers, (ii) and hence increase company's profit
b/c ABM can produces much more accurate costing information and improve company's effectiveness and efficiency.
What is labour intensive process?little overhead=> very rarely used machines
What is automated process?heavy overhead=> use mostly machines
What is activity?repetitive action that will fulfill a business function e.g. lift material [verb, noun]
What is a process map? list all steps that will take us to produce the product / provide service
Process map can help _____in provide a detail list of activities so that duplicate, waste, and unnecessary work can be identified.
value chartone kind of process map.It show detail time spent for all the value added and non-value added activities from the beginning till the end of the process
value added activityincrease worth of the product or service to customers and which they are willing to pay for
Define non-value added activityincrease time spent on production but value received from customers will not be affectede.g. moving & waiting
What is value added processing times? time spent to perform a function that is require in production of products
What is value added service time? time spent to perform all necessary service functions for a customer
Non-value added activity include transfer time, idle time, inspection time, NVA production/performance time
transfer time move things from one place to another
idle time waiting time in production or product storage time
What non-value added activities are hard to remove for most company? transfer time and idle time
inspection time
time spent on inspecting products=> this is NVA b/c if we can control a high quality of the products we don't need to spend time on inspection. So, it does not add value on product itself=> for
business value added activityactivity require to run the business but customers do not want to pay for.e.g. auditing
cycle timetotal time from customer send an order till the product/service delivered OR under full service approach, the end point is when the product/service delivered to the market
NVA activities usually caused by _____, _____, ____ systemic, physical, and human factors
NVA can or cannot 100% removed? No.
What is JIT?Just in time system is a philosophy that perform production, purchasing, and delivery products only when needed
How JIT used at Dell?
*4-points: suppliers, arrange of manufacturing plan, lift-tools, no inspection time or effort.
(1)Arrange manufacturing plan in a smooth and automated way: WIP products will move smoothly from one dept. to another.(2) Used hydraulic tools to lift in-process materials between production; reduce 50% time contact by human; reduct damaged and reworked rate.(3) No time or effort spent on inspection; maintain 0-defective rate by regular audit and diagnostic test => reduce cycle time(4) consolidated with many suppliers to form a single logistics centre which is managed by third party; allow one truck to deliver multiple parts;
What is cost driver? factors that have direct cause and effect relationships to costs
How cost driver to be selected? should be easy to understand; directly related to activity perform;
How many cost drivers should be chosen?More the better; more accurate; but it requires a high cost to accumulate the data so we should choose them at the cost-benefit method
What is a cost pool? A group of indirect costs using a "single activity"
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3rd side (hint)
Wages = Variable Salary = Fixed
Over applied overheadSubtract from Cost of Goods Sold, Credit Cost of Goods Sold
too much was added in Cost of Goods Sold, therefore deduct
Under applied overheadAdd to Cost of Goods Sold, Debit Cost of Goods Sold
too little was added to Cost of Goods Sold, therefore add back
Predetermined Ovherhead RateEstimated manufacturing overhead / Esitmated Direct Labor Cost or Machine Hours
Service Companies will use an account called Service Overhead Control
Cost of Services Billed is used instead of Gost of Goods Sold
Normal Cost
Cost of job determined by actual direct material and labor costs applied using a predetermined rate and an actual allocation base
Direct Labor is recorded In Work in Process
Total Cost per Job basic Formula
Beginnint Work in Process+ Direct Materials+ Direct Labor+ Overhead (predetermined rate)= Total Job Cost
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ABC full costing assigns as many costs to products as possible
ABC unit costing assigns only the costs of unit-level resources to products
abnormal spoilage is due to reasons other than the usual course of operations of a process
absolute performance evaluation compares individual performance to set standards or expectations
absorption or full costing applies all manufacturing-overhead costs to (or absorbs) manufactured
goods
account analysisestimates costs by measuring fixed and variable costs for each activity account
accuracy is precision in measurement
activityis any discrete task that an organization undertakes to make or deliver a good or service
activity-based budgeting (ABB)is the process of developing a master budget using information obtained from an activity-based (ABC) analysis
activity-based costing (ABC)is a costing method that first assigns costs to activities and then to goods and services based on how much each good or service uses the activities
activity-based flexible budgetis based on several cost drivers rather than a single, volume-based cost driver
activity-based management (ABM)is used by management to evaluate the costs and values of process activities to identify opportunities for improved efficiency
activity-based responsibility accountingis a system for measuring the performance of an organization's employees and subunits, which focuses not only on the cost of performing activities but also on the activities themselves
activity dictionary lists activities performed by an organization to produce its products
actual costingassigns only actual costs of both direct and indirect resources (i.e., direct materials, direct labor, and manufacturing overhead) to products
actual overheadis the amount of manufacturing overhead actually incurred during an accounting period
adjusted R-squareserves the same purpose as the R-square but applies a statistical penalty for each added independent variable
administrative costs are incurred to manage the organization and provide staff support
agency costsare the sum of opportunity costs of misbehavior and out-of-pocket costs for incentives and monitoring performance
agency theoryis an economic theory of incentives and behavior based on the relationship between a principal who offers an incentive plan and an agent who accepts the plan to work on behalf of the principal
applied overheadis the amount of manufacturing overhead assigned to Work-in-Process Inventory as a product cost. It is calculated by multiplying the predetermined overhead rate by the actual cost driver volume.
appraisal activities(also called detection or inspection activities) inspect inputs and attributes of individual units of product or service to detect whether they conform to specifications or customer expectations
attributes (of a product or service) are its tangible and intangible features
average cycle time equals total processing time for all units divided by good units produced
backflush costing
is a simplified cost-accounting system in which all manufacturing costs are charged directly to Cost of Goods Sold, and then end-of-period adjustments are made to credit Cost of Goods Sold and debit the respective inventory accounts
balanced scorecardis a performance measurement system or business model that ties together knowledge of strategy, processes, activities, and operational and strategic performance measures
bar-coding systemscreate a unique bar code for each order and allow companies to mark and track all orders electronically
base budgeting
is a budgeting system wherein the initial budget for each organizational department is set in accordance with a base package, which includes the minimal resources required for the subunit to exist at an absolute minimal level
base packageincludes the minimal resources required for the subunit to exist at an absolute minimal level
batch-level costs are incurred for every batch of product or service produced
batch-level resources and activities are acquired and performed to make a group, or batch, of similar products
behavioral congruenceoccurs when an individual behaves in the best interests of the organization regardless of his or her own goals
benchmarkingis a technique for determining an organization's competitive advantage by learning about its own products, services, and operations and comparing them against the best performers
benchmarksare important competitive features that form the bases of comparison and exist either inside or outside one's own organization, or in other industries
benefit–cost analysis see cost–benefit analysis
bottleneck is the constraint or constraining factor limiting production or sales
break-even point is the volume of activity that produces equal revenues and costs for the
organization
budgetis a detailed plan, expressed in quantitative terms, that specifies how an organization will acquire and use resources during a particular period of time
budget committee advises the budget director during the preparation of the budget
budget director (or chief budget officer)specifies the process by which budget data are gathered, collects the information, and prepares the master budget
budget manualindicates who is responsible for providing various types of budget information, when the information is required, and what form the information is to take
budgetary slackis the difference between the revenue or cost projection that a person provides and a realistic estimate of the revenue or cost
budgeted balance sheetshows the expected end-of-period balances for the company's assets, liabilities, and owners' equity
budgeted financial statementsshow how the organization's financial statements will appear at a specified time if operations proceed according to plan
budgeted income statementshows the expected revenue and expenses for a budget period, assuming that planned operations are carried out
budgeted schedule of cost of goods manufactured and solddetails the direct-materials, direct-labor, and manufacturing overhead costs to be incurred, and shows the cost of the goods to be sold during a budget period
budgeting system comprises the procedures used to develop a budget
business processes support or enable production processes
by-productis the output from a joint-production process that is minor in quantity and/or economic value when compared to the main products
capacityis a measure of a process's ability to transform resources into valued products and services
capital budget is a plan for buying and selling capital assets
capital turnover is sales revenue divided by invested capital
cash budgetdetails the expected cash receipts and disbursements during a budget period
cash disbursements budget details the expected cash payments during a budget period
cash receipts budget details the expected cash collections during a budget period
cause-and-effect analysisinvolves formulating diagnostic signals that identify potential causes of product or service defects
centralizationplaces the responsibility for decisions with the top echelon of management
committed costis a cost for which management has taken actions that result in some level of commitment to incur it
common-size statements express items as percentages of revenue
competitive advantageis a resource, process or value chain that enables an organization to provide more value, perhaps at lower cost, than its competitors
constant gross margin percentage methodallocates joint costs to products in a way that the gross margin as a percentage of revenue is the same for each product
constraintis a process or resource in a system that limits the throughput of the system
contribution marginis the amount of sales revenue remaining, after covering all variable costs, to contribute to covering fixed cost and profit
control chartdescribes variation in product or service attributes over time by measuring important quality features but additionally compares them to maximum- and minimumdesired levels
controllable costIs a cost subject to the control or substantial influence of a particular individual
conversion costs include direct labor and manufacturing overhead
costis the sacrifice made, usually measured by the resources given up, to achieve a particular purpose
cost-accounting systems measure the use of resources in production
Cost Accounting Standards Board (CASB)is a federal agency chartered by Congress in 1970 to develop cost-accounting standards for large government contractors
cost allocationassigns indirect costs to products or organizational units (e.g., departments)
cost allocation bases are factors used to assign indirect costs to cost objects
cost centeris an organizational subunit whose manager is responsible for the cost of an activity for which a well-defined relationship exists between inputs and outputs
cost driveris a characteristic of an activity or event that causes that activity or event to incur costs
cost estimationis the process of estimating the relationship between costs and the cost drivers that cause those costs
cost objectis any end to which a cost is assigned, such as a product unit or a department
cost of goods soldis the expense measured by the cost of the units sold during a specific period of time
cost of quality (COQ)is the cost of activities to control quality and costs of activities to correct failure to control quality
cost managementis a philosophy, an attitude, and a set of techniques to create more value at lower cost
cost pools are groups or categories of individual cost items
cost variance is the difference between the actual cost and the standard cost
cost-based transfer pricingsets the transfer price on the basis of the cost of the product or service transferred
cost–benefit analysisis a method to measure the effects of plans by comparing costs and benefits, which can be either quantitative or qualitive
cost-driver base is the base used to trace or assign costs to activities
cost-driver rateis the estimated cost of resource consumption per unit of cost-driver base for each activity
cost-management systemsrepresent a set of cost-management techniques that function together to support the organization's goals and activities
cost-reduction targetis the difference between the total target cost and the currently feasible total cost
cost-volume-profit (CVP) modelis a profit-planning model that reflects the effects of changes in an organization's sales volume, revenue, and costs on profit or income
critical success factorsare the key strengths that are most responsible for making the organization successful
currently feasible costis the cost of all current operations necessary to produce and deliver a product
customer costing analyzes the costs of activities to serve specific customers
customer-level costs are incurred for specific customers
customer-level resources and activities are acquired and performed to serve specific customers
customer profilecategorizes individual or types of customers according to the major activities that drive revenues and costs
customer profitability analysisidentifies the costs and benefits of serving specific customers or customer types to improve an organization's overall profitability
customer retention or loyalty measures indicate how well a company is doing in keeping its customers
customer satisfactionis the degree to which expectations of attributes, customer service, and price have been or are expected to be met
customer valuereflects the degree to which products and ser vices satisfy customers' expectations about price, function, and quality
customer-focused quality is a broad focus on meeting or exceeding customer expectations
customer-response timeis the amount of time between a customer's placing an order for a product or requesting service and the delivery of the product or service to the customer
decentralizationplaces decision-making responsibility at divisional and departmental levels
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decision treeis a diagram of decisions and alternative outcomes expected from those decisions in a "tree, branch, and limb" format
decision usefulness(of information) is whether managers make sufficiently better decisions to justify the cost of the information
defectis an attribute (tangible or intangible) that falls short of customer expectations
Deming Prizecreated in Japan by the Japanese Union of Scientists and Engineers, is awarded to companies around the world that excel in quality improvement
dependent variables are caused by, or at least correlated with, independent variables
differential costs are costs that differ between decision alternatives
direct costs are costs traceable to a particular cost object
direct laboris the cost of compensating employees whose work creates the organization's products
direct-labor budgetshows the number of hours and the cost of direct labor to be used during a budget period
direct-labor efficiency varianceis the difference between the actual hours and the standard hours of direct labor allowed, given actual output, multiplied by the standard hourly labor rate
direct-labor mix variance
(for a particular type of direct labor), is the difference between the actual and standard input proportions for that type of direct labor multiplied by that labor type's standard rate and multiplied by the actual total quantity of all direct labor used
direct-labor rate varianceis the difference between the actual and standard hourly labor rate multiplied by the actual quantity of direct labor used
direct-labor yield variance
(for a particular type of direct labor), is the difference between the actual quantity of all direct labor used and the standard quantity of all direct labor, given actual output, multiplied by the standard rate for that particular type of direct labor and multiplied by the standard input proportion for that type of direct labor
direct materialsare resources such as raw materials, parts, and components that one can feasibly observe being used to make a specific product
direct-material budgetshows the number of units and the cost of materials to be purchased and used during a budget period
direct-material mix variance
(for a particular direct material) is the difference between the actual and standard input proportions for that direct material multiplied by that material's standard price and multiplied by the actual total quantity of all direct materials used
direct-material price variance(or purchase price variance) is the difference between the actual and standard price multiplied by the actual quantity of material purchased
direct-material quantity varianceis the difference between the actual quantity and the standard quantity of material allowed, given actual output, multiplied by the standard price
direct-material yield variance
(for a particular direct material) is the difference between the actual quantity of all direct materials used and the standard quantity of all direct materials, given actual output, multiplied by that particular direct material's standard price and multiplied by that direct material's standard input proportion
direct method
The direct method of cost allocation charges the costs of support service departments to internal customers without making allocations among support-service departments. All support-service cost allocations go directly to production departments
direct-service (or line) departments provide services directly to external customers
discount rateis an interest rate used to discount future cash flows to their net present values
discretionary cost centeris an organizational subunit whose manager is held accountable for costs, but the subunit's input– output relationship is not well specified
distribution costsinclude the costs of packing, shipping, and delivering products or services to customers
dual transfer pricingcharges the buying division for the cost of the transferred product and credits the selling division with the cost plus some profit allowance
due diligenceis exercising all reasonable care to identify potential problems and opportunities of a proposed investment
economic order quantity (or EOQ)is the order quantity that minimizes the cost of ordering and holding inventory
economic value added (EVA®)is an investment center's aftertax operating income minus its total assets (net of its current liabilities) times the company's weighted-average cost of capital
employee capabilitiesare employees' knowledge and skills that indicate the organization's ability to meet future customer needs and generate new sales
engineering estimatesmeasure the work involved in the activities that go into a product then assign a cost to each of those activities
EOQ modelis a mathematical tool for determining the order quantity that minimizes the cost of ordering and holding inventory
equivalent unitsrepresent the amount of work actually performed on products not yet complete translated to the work required to complete an equal number of whole units
excess (or unused) capacityis the amount (if any) by which practical capacity exceeds the demand for the output of the process
expectancy theoryexplains that people are motivated to act in ways that they expect to provide them the rewards that they desire and to prevent the penalties that they wish to avoid
expected valueis the value of each possible measure weighted or multiplied by its probability of occurrence
expected value analysissummarizes the combined effects of relevant future events on decision outcomes, weighted by the probabilities or odds that the events will occur
expenseis defined as the cost incurred when an asset is used up or sold for the purpose of generating revenue
extended value chainencompasses the ways companies obtain their resources and distribute their products and services, possibly using the services of other organizations
external failurerequires activities when defective products or services are detected after being delivered to customers
extrinsic rewardsinclude grades, money, praise, and prizes that come from outside the individual
facility (or general-operations) level costsare incurred to maintain the overall facility and infrastructure of the organization
facility-level resources and activitiesare acquired and performed to provide the general capacity to produce goods and services
feasible solution space is the combination of input and output values that satisfy the constraints
final product is one that is ready for sale without further processing
financial budget shows how the organization will acquire its financial resources
financial modelis an accurate, reliable simulation of relations among relevant costs, benefits, value, and risk that is useful for supporting business decisions
financial planning modelis a set of mathematical relationships that expresses the interactions among the various operational, financial, and environmental events that determine the overall results of an organization's activities
finished goods are products ready for sale
first-in, first-out (FIFO) costingis an inventory method that identifies the first units completed as the first ones sold or transferred out
fixed costs remain unchanged in total as the volume of activity changes
fixed-overhead budget varianceis the difference between actual fixed overhead and budgeted fixed overhead
fixed-overhead volume varianceis the difference between budgeted fixed overhead and applied fixed overhead
flexible budget is a budget that is valid for a range of activity
flowchartreflects cause-and-effect and sequential linkages among process activities
Gantt chartdepicts the stages required to complete a project and the sequence in which the stages are to be performed
goal congruenceresults when managers of subunits throughout an organization have a common set of objectives
high-low methodestimates a cost function using only the costs and the level of cost-driver activity from the highest and lowest levels of cost-driver activity
histogramis a chart that displays the frequency distribution of an attribute's measures—its range and degree of concentration around an average attribute value
idle time is time not spent productively by an employee
imperfect competitiondescribes the situation when a single producer can affect the market price by varying the amount of product available in the market
incentive systemcommunicates strategy, motivates employees, and reinforces achievement of organizational goals
incremental packagedescribes the resources needed to add various activities to the base package
independent variablesare the cost drivers that the analyst believes cause, or at least are correlated with, the dependent variable costs
indirect costs are costs not feasibly traceable to a particular cost object
indirect labor costconsists of the wages of production employees who do not work directly on the product but are required for the manufacturing facility to operate
indirect materialsrelates to materials that either (1) are not a part of the finished product but are necessary to manufacture it or (2) are part of the finished product but are insignificant in cost
information qualityhas dimensions of usefulness, subjectivity, accuracy, timeliness, cost, and relevance
input is a material or activity that is required to produce a product or service
intermediate productis a product that might require further processing before it is salable to the ultimate consumer
internal auditis an examination of operations, programs, and financial results performed by independent investigators
internal controlis a process designed to provide reasonable assurance that an organization will achieve its objectives
internal failurerequires activities to correct defective processes, products, and services that are detected before delivering them to customers
internal rate of return (IRR)is the interest rate that equates the present value of inflows and outflows from an investment project
intrinsic rewardscome from within the individual including the satisfaction from studying hard, the feeling of well-being from physical exercise, the pleasure from helping someone in need, or the satisfaction of doing a good job
inventoriable cost is another term for product cost
inventory carrying costs are costs of receiving, handling, storing, and insuring inventory
investment centeris an organizational subunit whose manager is held accountable for the subunit's profit and the invested capital used by the subunit to generate its profit
ISO 9000 is a set of international standards for quality management
job-cost record (or file, card or sheet)reports the costs of all production-related resources used on the job to date
job-order costingtreats each individual job as the unit of output and assigns costs to each job as resources are used
joint products are the products that jointly result from processing a common input
joint costs are costs to operate joint processes, including the disposal of waste
joint process simultaneously converts a common input into several outputs
just-in-time (JIT)processes purchase, make, and deliver services and products just when needed
kaizen costingis the process of cost reduction during the manufacturing phase of a product
lagging indicatoris the measure of the final outcomes of earlier management plans and their execution
leading indicatoris the measure that identifies future nonfi- nancial and financial outcomes to guide management decision making
lead time is the time required for the material to be received after an order is placed
learning curveis the mathematical or graphic representation of the systematic relationship between the amount of experience in performing a task and the time required to perform it
learning phenomenonis a systematic relationship between the amount of experience in performing a task and the time required to perform it
life cycle costing tracks costs attributable to each product or service from start to finish
linear programmingshows how best to allocate multiple scarce resources among alternative courses of action in the short run when capacity cannot be increased
lost unitsare goods that evaporate or otherwise disappear during a production process
lower control limit is the minimum-desired level of product or service feature
main productis a joint output that generates a significant portion of the net realizable value from the process
Malcolm Baldrige Quality Awardcreated by the US Congress in 1987, recognizes US firms with outstanding records of quality improvement and quality management
management by exception is the process of following up only on significant cost variances
manufacturing overheadincludes all costs of transforming material into a finished product other than direct material and direct labor
manufacturing-overhead budgetshows the cost of overhead expected to be incurred in the production process during the budget period
margin of safety is the amount by which a quantitative objective is exceeded
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marketing costsinclude the costs of personnel, databases, equipment, and facilities dedicated to providing market research, marketing strategy, and marketing plans
master budget, or profit planis a comprehensive set of budgets covering all phases of an organization's operations for a specified period of time
material requisition formis the source document for the transfer of raw material from Raw-Material Inventory to Workin- Process Inventory and to the job-cost record for the production job
maximum quality levelis total delight of the customer or zero defects, depending on one's definition of quality
mixed costs have both a fixed and a variable component
model is a representation of reality
model elasticityis the ratio of the percentage change in profit divided by the percentage change of an input parameter
multicollinearityis the correlation between two or more independent variables in a multiple regression equation
multiple regression is a regression equation with more than one independent variable
net present value (NPV)is the present value of a project's future cash flows less its purchase price. It is the economic value of a project at a point in time
net realizable value (NRV)is the measure of a product's contribution to profit after the split-off point and is computed as sales revenue minus additional processing costs
net realizable value (NRV) methodallocates joint costs based on the NRV of each main product at the split-off point
new product(or service) development time is the period between the first consideration of a product and its initial sale to the customer
non-value-added activities do not contribute to customerperceived value
normal costing
assigns to production jobs the cost of actual direct materials, actual direct labor, and applied manufacturing overhead, which are calculated by multiplying the predetermined overhead rate by the actual amount of the cost driver
normal spoilageis spoiled product that results from the regular operation of the production process
objective functionis a mathematical relation of inputs and outputs to be maximized or minimized
objectivitydescribes the degree of consensus about what to measure, how to measure it, what the observed measure is, or whether the measurement is important
operating leveragereflects the risk of missing sales targets and is measured by the ratio of contribution margin to operating income
operationis a standardized method of making a product that is repeatedly performed
operation costingis a hybrid of job-order and process costing, which is used when companies produce batches of similar products with significantly different types of material
operational budgetsspecify how an organization's operations will be carried out to meet its demand for goods or services
operational performance analysismeasures whether the performance of current operations is consistent with expectations
opportunity cost is the forgone benefit of the best alternative use of a resource
optimum pointis the set of inputs and outputs in the feasible solution space that maximizes or minimizes the objective function
outsourcing is acquiring goods or services from an outside provider
overapplied overhead refers to actual overhead that is less than applied overhead
overhead cost performance reportshows the actual and flexible-budget cost levels for each overhead item, together with the variable-overhead spending and efficiency variances and the fixed-overhead budget variance
overhead varianceis the difference between the actual and the applied manufacturing overhead amounts
overtime premiumis the extra hourly compensation paid to an employee who works beyond the time normally allowed by regulation or labor contracts
padding the budget means intentionally underestimating revenue or overestimating costs
Pareto chartprioritizes the causes of problems or defects as bars of varying height, in order of frequency or size
participative budgeting involves employees throughout an organization in the budgeting process
payback periodis the time necessary to recover the investment cost from nondiscounted cash flows
pay for performancebases at least a portion of a manager's income on measure(s) of organizational performance rather than a guaranteed amount
perfect competitiondescribes the situation when the market price does not depend on the quantity sold by any one producer
perfection (or ideal) standard is one that can be attained only under nearly perfect operating conditions
performance evaluation formula describes rewards earned for specific achievements
performance measureis an indicator that allows a person to determine the level of performance according to some critical attribute and to compare performance to expectations
performance reportshows the budgeted and actual amounts of key financial (or nonfinancial) results appropriate for the type of responsibility center involved
period costsare identified with the time period in which they are incurred rather than with units of purchased or produced goods
physical-measures (or quantities) methodis a joint-cost allocation based on the relative volume, weight, energy content, or other physical measure of each joint product at the split-off point
pilot projectis a limited-scope project intended to be a smallscale model of a larger, possibly systemwide, project
practical (or attainable) standards are challenging, but possible, to achieve
practical capacity(of a process) is its theoretical capacity less planned downtime for scheduled maintenance or improvements
predatory pricinginvolves temporarily setting a price below cost to broaden demand for a product and injure competitors
predetermined overhead rateis the budgeted manufacturing overhead divided by the budgeted level of the cost driver
present valueis the equivalent amount that would have to be invested today to generate a future cash flow at a given discount or opportunity rate
preventionrefers to activities that seek to prevent defects in the products or services being produced
price discriminationis the quoting of different prices to different customers for the same products, with an intent to harm competitors
prime costsare the primary costs of producing a good or service that includes direct materials and direct labor but not overhead
prior department costsare manufacturing costs incurred in another department and transferred to a subsequent department in the manufacturing process
processis a related set of tasks, manual or automated, that transforms inputs into identifiable outputs
process capacityis a measure of a process's ability to transform recourses into valued products and services
process costingtreats all units processed during a time period as the output to be costed and does not separate and record costs for each unit produced
process efficiency is the ability to transform inputs into outputs at lowest cost
product costis a cost assigned to goods that were either purchased or manufactured for resale
product-costing systemis a system that accumulates the costs of a production process and assigns them to the products that constitute the organization's output
product life cycleis the time that elapses from its initial research and development to the point at which customer support is withdrawn
product mix is the relative proportion of each type of product planned or actually sold
production budgetshows the number of units of services or goods that are to be produced during a budget period
production cost reports summarize production and cost results for a period
production cycle timeis the time between starting and finishing a production process, including time to correct mistakes
production (or line) departments provide goods and services directly to external customers
production processesdirectly result in the production of products or services provided to external customers
productivityis the ratio of outcomes of a process divided by the amount of resources necessary to complete the process
product-level costs are incurred for each line of product or service
product-level resources and activities are acquired and performed to produce and sell a specific good or service
profit center is an organizational subunit whose manager is held accountable for profit
profit plan (or master budget)is a comprehensive set of budgets covering all phases of an organization's operations for a specified period of time
prorated overhead varianceassigns proportionate amounts of it to Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold
prorationis the process of allocating cost variances to Workin- Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold
qualitative factorsare the characteristics of a decision that cannot easily or should not be expressed in numerical terms
qualitative informationis descriptive and based on characteristics or perceptions, such as relative desirability, rather than quantities
quantitative informationis expressed in dollars or other quantities relating to size, frequency, and so on
raw material is material that has not yet been entered into production
real option value (ROV)is the difference between the expected NPV of one option form of the investment and the next best option
real option value (ROV) analysiscombines analyses of decision trees, expected values, and NPV to describe investments as a series of options to change investments
reciprocal methodrecognizes and allocates costs of all services provided by any support-service department, including those provided to other support-service departments
reciprocal services are services provided among multiple supportservice departments
regression analysisis a statistical method used to create an equation relating independent (or X) variables to dependent (or Y) variables
relative performance evaluation is based on comparing an individual's performance to that of others
relative sales value at split-off methodallocates joint costs based on the relative sales values of the joint products at their split-off point
relevance refers to whether information is pertinent to a decision
relevant costs and benefits occur in the future and differ among feasible decision alternatives
relevant rangeis the range of activity within which the organization expects to operate and over which assumed cost patterns are reasonably accurate
residual income (RI)(of an investment center) is its profit minus its invested capital times an inputted interest rate
resources supplied refer to the capacity that the organization makes available for use
resources used refer to the resources actually used for productive purposes
responsibility accountingrefers to the various concepts and tools used to measure the performance of people and departments in order to foster goal or behavioral congruence
responsibility centeris a subunit in an organization whose manager is held accountable for specified results of the subunit's activities
return on investment (ROI) (for an investment center) is its income divided by its invested capital
return on quality (ROQ)is the view that assumes there is a trade-off between the costs and benefits of improving quality
revenue budget varianceis the difference between the actual total sales revenue and the budgeted total sales revenue
revenue centeris an organizational subunit whose manager is held accountable for the revenue attributed to the subunit
revenue market-share varianceholds constant the total industry volume at its actual sales level and focuses on the company's market share
revenue market-size varianceholds constant the company's market share at its budgeted level and focuses on changes in total industry volume
revenue sales-mix variancefocuses on the effects of changes in the sales mix while holding constant the effects of the products' sales prices and the total sales volume
revenue sales-quantity varianceholds constant the sales-price and sales-mix effects and focuses on the effect of the overall unit sales volume
revenue sales-volume varianceholds constant the products' sales prices at their budgeted levels and focuses on deviations between actual and budgeted sales volumes
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revolving (or continuous) budget is another name for a rolling budget
rolling (or revolving or continuous) budgetis continually updated by periodically adding a new incremental time period
R-square (R2)is the proportion of the variation in the dependent variable explained by the X , or independent, variables
runrefers to sequential values above or below the mean or values sequentially increasing or decreasing
run chartshows trends in variation in product or service attributes over time by reflecting measures of important quality features taken at defined points in time
safety stockis the potential excess usage of material when material usage fluctuates during the lead time
sales budget displays the projected sales in units and the projected sales revenue
sales forecasting is the process of predicting sales of services or goods
sales margin is income divided by sales revenue
sales mix is the relative proportion of each type of product planned or actually sold
sales-price variancefocuses on the differences between actual and budgeted sales prices while holding constant the sales volume at its actual level
scatter diagram is a plot of two measures that could be related
scattergraph plots costs against activity levels
scenario analysis creates realistic combinations of changed parameters
scenarios are realistic combinations of changed parameters
selling costsare the costs of sales personnel, databases, equipment, and facilities devoted to sales activities
selling, general, and administrative (SG&A) expense budgetshows the planned amounts of expenditures for selling, general, and administrative expenses during a budget period
semivariable costs have both a fixed and a variable component
sensitivity analysisis the study of how the outcome of a decision- making process changes as one or more of the assumptions change
simple regressionis a type of statistical analysis in which the regression equation has only one independent variable
special ordersare irregular and do not have lasting implications for other products or customers
split-off point is the point at which joint products separate in the production process
spoilagerepresents goods that are damaged, do not meet specifications, or are otherwise not suitable for further processing or sale as good output
standard cost is a budget for the production of one unit of product or service
standard costinguses a predetermined (or standard) rate for both direct and indirect costs (i.e., direct material, direct labor, and manufacturing overhead) to assign manufacturing costs to products
standard-costing systementers the standard costs of direct material, direct labor, and manufacturing overhead into the Workin- Process Inventory account
standard direct-labor quantityis the number of labor hours normally needed to manufacture one unit of product
standard direct-labor rate is the total hourly cost of compensation, including fringe benefits
standard direct-material price is the total delivered cost after subtracting any purchase discounts
standard direct-material quantityis the total amount of materials normally required to produce a finished product, including allowances for normal waste or inefficiency
static budget is valid for only one planned activity level
statistical control chartplots cost variances across time and compares them with a statistically determined critical value that triggers an investigation
step (semifixed) costs increase in steps as the amount of the cost-driver volume increases
step method
(of cost allocation) allocates costs first from the support-service department with the largest proportion of its total allocation base in other support-service departments to other support-services or support- and direct-service or production departments, then allocates costs from less general support-service departments
stock appreciation rights (SARs)confer bonuses on employees based on increases in stock prices for a predetermined number of shares
stock optionsgive an individual the right to purchase a certain number of shares at a specified price over a specified time period
strategic decision makingis the process of choosing and implementing actions that will affect an organization's future abilities to achieve its goals
strategic investment is a choice among alternative courses of action and the allocation of
resources to those alternatives most likely to succeed after anticipating (1) changes in natural, social, and economic conditions and (2) actions of competitors
strategic long-range plan expresses the specific steps required to achieve an organization's goals
strategic performance analysis measures whether a strategic decision has met expectations
strategic planningis the process of deciding on an organization's major programs and the approximate resources to be devoted to them
strategy is an organization's overall plan or policy to achieve its goals
subjective performance evaluation is based on nonquantified criteria
subjectivitydescribes the degree of disagreement about what to measure, how to measure it, what the observed measure is, or whether the measurement is important
sunk costsare past payments for resources that cannot be changed by any current or future decision
support (or service) departmentsdo not work directly on a product but are necessary for the production process to operate
support-service costsare the costs of resources supplied by an organization to provide the support services
support-service (or indirect) departments provide support services to each other and to the production departments
tangible objectives are benchmarks capable of being measured in some manner
target costis the highest cost of a good or service that meets both customer needs and company profit goals
target costingis a decision-making method that seeks to achieve products and services with specific features at target costs based on expected market prices and target profits
target profit is the desired excess of periodic or project sales revenues over costs
task analysis is the technique of setting standards by analyzing the production process
tax credit is a reduction in state and/or federal income taxes
theoretical capacity(of a process) is the maximum possible rate of transformation of inputs into outputs if the process were fully used, with no downtime or unused capacity
theory of constraintsseeks to improve productive processes by focusing on constrained resources
throughputis the amount of goods and services produced and delivered to customers during a period of time measured in dollar terms or physical measures
throughput costingassigns only the unit-level spending for direct costs as the cost of products or services
throughput efficiency is the relation of throughput achieved to resources used
throughput (cycle) time is the average time required to convert raw material into finished goods
throughput time ratiois the ratio of the time spent adding customer value to products and services divided by total cycle time (also known as the "ratio of work content to lead time")
time-based activity-based costingTime-based activity-based costing (ABC) is a method of ABC that uses time as the cost driver base to replace some or all parts of ABC systems that have multiple cost-driver bases
time value of moneyis the concept that cash received earlier is worth more than cash received later
timelinessmeans that information is available in time to fully consider it when making a decision
total delightoccurs when a customer receives a product or service that far exceeds his or her expectations of quality
total factor productivityis the value of goods and services divided by the total cost of providing them
total quality management (TQM)is the view that improvements in quality, as defined by customers, will always result in improved organizational performance because improving quality will improve efficiency as problems are identified and eliminated
transfer priceis the amount charged when one division of an organization sells goods or services to another division
t -statistic, t, is the value of b, the coefficient, divided by its standard error, SEb
underapplied overhead refers to actual overhead that exceeds applied overhead
unit-level costs are incurred for every unit of product manufactured or service produced
unit-level resources and activities are acquired and performed specifically for individual units of product or
service
unused capacityis the difference between the resources supplied and the resources used. Unused capacity is the amount of capacity that the organization has supplied that is not being used for productive purposes
upper control limit is a maximum-desired level of product or service feature
value chainis the relationship of an organization's processes that links ideas, resources, suppliers, and customers
value-added activitiesenhance the value of products and services in the eyes of the organization's customer while meeting its own goals
variable (or direct) costingapplies only variable manufacturing overhead to manufactured goods as a product cost along with direct materials and direct labor
variable costs change in total in direct proportion with a change in the activity volume
variable-overhead efficiency varianceis the difference between the actual and standard hours of an activity base (or cost driver) multiplied by the standard variable-overhead rate
variable-overhead spending varianceis the difference between the actual variable-overhead cost and the product of the standard variable-overhead rate and the actual hours of an activity base (or cost driver)
variances are the differences between a plan's actual and expected quantities
virtual organizationsmaintain only the most important operations of the value chain and outsource everything else
weighted-average cost of capital (WACC)is the average of the after-tax cost of debt capital and the cost of equity capital, weighted by the relative proportions of the firm's capital provided by debt and equity
weighted-average costingis an inventory method that for product-costing purposes combines costs and equivalent units of a period with the costs and the equivalent units in beginning inventory
weighted-average unit contribution margin (WAUCM)is the average of the various products' unit contribution margins weighted by the relative proportion of each product sold
work in process refers to partially completed products
zero-base budgetinginitially sets the budget for virtually every activity in the organization to zero
