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    Cost Definitions

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    Monina Cabalag
    This document defines various types of costs used in accounting. It discusses direct and indirect costs, fixed and variable costs, as well as production costs, period costs, and overhead. Key terms include absorption cost, conversion cost, committed fixed cost, discretionary fixed cost, factory overhead, finished goods, and inventoriable costs. The document provides definitions for over 30 different cost terms.

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    Cost Definitions

    Uploaded by

    Monina Cabalag
    41 views2 pages
    This document defines various types of costs used in accounting. It discusses direct and indirect costs, fixed and variable costs, as well as production costs, period costs, and overhead. Key terms include absorption cost, conversion cost, committed fixed cost, discretionary fixed cost, factory overhead, finished goods, and inventoriable costs. The document provides definitions for over 30 different cost terms.

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    Cost def

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    This document defines various types of costs used in accounting. It discusses direct and indirect costs, fixed and variable costs, as well as production costs, period costs, and overhead. Key terms include absorption cost, conversion cost, committed fixed cost, discretionary fixed cost, factory overhead, finished goods, and inventoriable costs. The document provides definitions for over 30 different cost terms.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    41 views2 pages

    Cost Definitions

    Uploaded by

    Monina Cabalag
    This document defines various types of costs used in accounting. It discusses direct and indirect costs, fixed and variable costs, as well as production costs, period costs, and overhead. Key terms include absorption cost, conversion cost, committed fixed cost, discretionary fixed cost, factory overhead, finished goods, and inventoriable costs. The document provides definitions for over 30 different cost terms.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    Cost Definitions

    Absorption Costs: Direct labor plus direct materials Expense: A cost that has been matched with revenue and
    plus factory overhead. has therefore been recognized on the income statement.

    Avoidable Cost: A cost that can be eliminated by Factory Burden: Synonym for overhead.
    choosing one alternative over another.
    Factory Overhead Applied: The amount of overhead
    Committed Fixed Costs: Organizational investments that has been assigned to work-in-process through the
    with a multiyear planning horizon that cannot be use of a predetermined overhead rate in a normal costing
    significantly reduced even for short periods of time system.
    without making fundamental changes. Compare with
    Discretionary Fixed Costs. Factory Overhead Costs: Synonym with Overhead.

    Common Cost: A cost that is incurred to support a Finished Goods: Work-in-process that has been
    number of cost objects but cannot be traced to them completed and is ready for sale.
    individually. A common cost is a type of indirect cost.
    Fixed Cost: A cost that remains constant in total
    Conversion Costs: Direct labor plus factory overhead. regardless of the level of activity.
    The cost of converting direct materials into a finished Full Cost: Synonym for absorption cost.
    product.
    Incremental Cost: An increase in cost from one
    Cost: An amount paid or required in payment for a alternative to another or the cost to produce the next
    purchase; a price, or the expenditure of something, such product unit.
    as time or labor, necessary for the attainment of a goal:
    Indirect Costs: Costs that cannot easily be identified
    Cost of Goods Manufactured: The production cost with a final cost object.
    (direct labor plus direct materials plus overhead) of
    work-in-process finished this period and transferred Indirect Labor: Labor costs (within the factory) that
    from the factory to the finished goods storeroom. cannot easily be identified with a final cost object,

    Cost of Goods Sold: The production cost (direct labor Indirect Materials: Material cost (within the factory)
    plus direct materials plus overhead) of goods sold this that cannot easily be identified with a final cost object.
    period.
    Inventoriable Costs: Direct labor, direct materials and
    Differential Costs: The difference in costs between two overhead.
    alternatives.
    Joint Costs: Cost incurred by a joint process prior to the
    Direct Cost: A cost that can be easily traced to a specific time products are separately identifiable.
    cost object.
    Manufacturing Costs: Synonym for product costs.
    Direct Labor: Labor that can easily be identified with a
    specific cost object. Manufacturing Costs Added: The sum of direct labor,
    direct materials and overhead incurred during the
    Direct Materials: Materials that can easily be identified accounting period.
    with a specific cost object.
    Manufacturing Overhead Costs: Synonym for
    Discretionary Fixed Costs: Costs that arise from annual overhead.
    decisions of management to spend on certain fixed costs
    items. Compare with Committed Fixed Costs. Marginal Cost: Synonym for incremental cost.

    Compiled by Richard E. McDermott, January 3, 2012. Page 1


    Cost Definitions

    Mixed Cost: Costs that have both a fixed and variable Work-in-Process: Units of product that are only
    element. partially complete and will require further work before
    they are ready for sale to the customer.
    Nonmanufacturing Costs: Administrative and
    marketing costs.

    Opportunity Cost: The potential benefit given up when


    one alternative is selected over another.

    Out of Pocket Costs: Actual cash outlay costs.

    Overhead Costs: Indirect costs (within the factory)..

    Period Costs: The sum of administrative and marketing


    costs. Costs that appear on the income statement in the
    period in which they are incurred.

    Prime Costs: Direct labor plus direct materials.

    Product Costs: The sum of direct labor, direct materials


    and overhead. Synonymous with inventoriable costs,
    manufacturing costs and production costs.

    Production Costs: Synonymous with inventoriable


    costs, manufacturing costs and product costs.

    Raw Materials: Materials in the raw materials


    storeroom which have not been put into production or
    applied to an overhead account.

    Relevant Costs: Costs that differ between alternatives.

    Selling and Administrative Costs: Synonymous with


    period costs.

    Semi-variable Costs: Costs that vary non-proportionally


    with activity or volume.

    Standard Cost: In a standard costing system, what a


    cost “should be.”

    Sunk Costs: A cost that has been incurred and cannot be


    changed by any decision now or in the future.

    Variable Costs: A cost that varies proportionally with


    the level of activity.

    Compiled by Richard E. McDermott, January 3, 2012. Page 2

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