65 Cards in this Set
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activity-based costing ABC
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an accounting framework based on determining the cost of activities and allocating these costs to products using activity rates
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bottleneck
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a condition that occurs when product demand exceeds product capacity
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differential analysis
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the area of accounting concerned with the effect of alternative courses of action on revenues and costs
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differential cost
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the amount of increase or decrease in cost expected from a particular course of action compared with an alternative
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differential income (or loss)
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the difference between differential revenue and differential cost
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differential revenue
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the amount of increase or decrease in revenue expected from a particular course of action as compared with an alternative
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markup
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am amount that is added to a cost amount to determine product price
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opportunity cost
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the amount of income forgone from an alternative to a proposed use of cash or its equivalent
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product cost concept
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a concept used in applying the cost-plus approach to product pricing in which only the costs of manufacturing the product termed the product costs are included in the cost amount to which the markup is added
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sunk cost
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a cost that is not affected by subsequent decisions
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theory of constraints TOC
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a manufacturing strategy that attempts to remove the influence of bottlenecks (constraints) on a process
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target costing
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a concept used to design and manufacture a product at a cost that will deliver a target profit for a given market-determined price
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total cost concept
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a concept used in applying the cost-plus approach to product pricing in which all the costs of manufacturing the product included in the cost amount to which the markup is added
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variable cost concept
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often referred to as variable costing a method of reporting variable and fixed costs that includes only the variable manufacturing costs in the cost of the product
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budget
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an accounting device used in plan and control resources of operational departments and divisions
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budget performance report
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a report comparing actual results with budget figures
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budgetary slack
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excess resources set within a budget to provide for uncertain events
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budgeted variable factory overhead
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the standard variable overhead for the actual units produced
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capital expenditures budget
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the budget summarizing future plans for acquiring plant facilities and equiptment
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cash budget
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a budget of estimated cash receipts and payments
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continuous budgeting
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a method of budgeting that provides for maintaining a 12 month projection into the future
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controllable variance
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the difference between the actual amount of variable factory overhead cost incurred and the amount of variable factory overhead budgeted for the standard product
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cost of goods sold budget
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a budget of estimated direct materials direct labor and factory overhead consumed by sold products
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cost variance
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the difference between the actual cost and the standard cost at actual volumes
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currently attainable standards
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standards that represent levels of operation that can be obtained with reasonable effort
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direct labor cost budget
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a budget that estimates the direct labor hours and related costs needed to support budgeted production
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direct labor rate variance
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the cost associated with the difference between the standar rate and the actual rate paid for direct labor used in producing a commodity
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direct labor time variance
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the cost associated with the difference between the standard hours and the actual hours of direct labor spend producing a commodity
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direct materials price variance
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the difference between the actual price and standard price times the actual quantity
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direct materials purchases budget
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a budgets that uses the production budget as a starting point
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direct materials quantity variance
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the cost associated with the difference between the standard quantity and the actual quantity of direct materials used in producing a commodity
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factory overhead cost budget
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a budget that estimates the cost for each item of factory overhead needed to support budgeted production
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factory overhead cost variance report
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reports budgeted and actual costs for variable and fixed factory overhead for each cost element along with the related controllable and volume variance
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favorable cost variance
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actual cost is less than standard cost
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flexible budget
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a budget that adjusts for varying rates of activity
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goal conflict
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situation when individual self interest differs from business objectives
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ideal standards
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standards that can be achieved only under perfect operating conditions such as no idle time no machine breakdowns and no materials spoilage also called theoretical standards
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master budget
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the comprehensive budget plan linking the individual budgets related to sales, cost of goods sold, operating expenses, capital expenditures, and cash
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nonfinancial performance measure
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a performance measure expressed in other than dollars
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process
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a sequence of activities linked together for performing a particular task
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production budget
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a budget of estimated unit production
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responsibility center
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a budgetary unit within a company for which a manager is assigned responsibility over costs, revenues, or assets
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sales budget
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a budget that indicates for reach product the quantity of estimated sales and the expected unit selling price
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standard cost
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a detailed estimate of what a product should cost
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standard cost systems
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accounting systems that use standards for each manufacturing cost entering into the finished product
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standars
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performance goals
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static budget
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a budget that does not adjust to changes inactivity levels
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theoretical standards
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standards that can be achieved only under perfect operating conditions
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total manufacturing cost variance
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the difference between the total actual cost and the total standard cost for the units produced
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unfavorable cost variance
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actual cost exceeds standard cost
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volume variance
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the difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced
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zero-based budgeting
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a concept of budgeting that requires all levels of management to start from zero and estimate budget data as if there had been no previous activities in their units
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annuity
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a series of equal cash flows at fixed intervals
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average rate of return
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a method of evaluating capital investment proposals that focuses on the expected profitability of the investment
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capital investment analysis
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the process by which management plans, evaluates and controls long term capital investments involving fixed assets
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capital rationing
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the process by which management allocates available investment funds among competing capital investment proposals
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cash payback period
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the expected period of time that will elapse between the date of the capital expenditure and the complete recovery in cash for equivalent of the amount invested
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currency exchange rate
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the rate at which currency in another county can be exchanged for local currency
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inflation
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a period when prices in general are rising and the purchasing power of money is declining
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internal rate of return method IRR
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a method of analyzing proposed capital investments that focuses on the present value of the cash flows expected from the investments
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net present value method
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a method of analyzing proposed capital investments that focuses on the present value of the cash flows expected from the investments
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present value concept
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cash today is not the equivalent of the same amount of money to e received in the future
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present value index
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an index computed by dividing the total present value of the nest cash flow to be received from a proposed capital investment by the amount to be increased
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present value of an annuity
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the sum of the present values of a series of equal cash flows to be received at fixed intervals
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time value of money concept
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the concept that an amount of money invested today will earn income and thus has value over time
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ACCT 102: TEST 1