Cost Accounting glossary

Cost Accounting Glossary

account analysis Cost estimation method that calls for a review of each
account making up the total cost being analyzed.
(See page(s) p. 108)

activity-based costing Costing method that first assigns costs to activities and then
(ABC) assigns them to products based on the products'
consumption of activities.
(See page(s) p. 13, 239)

activity-based cost Use of activity analysis to make decisions and manage

management costs.
(See page(s) p. 269)

actual activity Actual volume for the period.

(See page(s) p. 280)

actual cost Cost of job determined by actual direct material and labor
cost plus overhead applied using an actual overhead rate and
 an actual allocation base.
(See page(s) p. 172)

adjusted R-squared Correlation coefficient squared and adjusted for the number
(R2) of independent variables used to make the estimate.
(See page(s) p. 117)

administrative costs Costs required to manage the organization and provide staff
support, including executive salaries, costs of data
processing, and legal costs.
(See page(s) p. 34)

appraisal costs (also Costs incurred to detect individual units of products that do
called detection costs) not conform to specifications.
(See page(s) p. 285)

asset acquisition Costs involved in purchasing and installing an asset that can
involve the disposal of old assets, resulting in a gain or a
loss.
(See page(s) p. 555)

balanced scorecard Performance measurement system relying on multiple

financial and nonfinancial measures of performance.
(See page(s) p. 14, 536)

behavioral congruence When individuals behave in the best interest of the

organization regardless of their own goals.
(See page(s) p. 344)

benchmarking Continuous process of measuring products, services, or

activities against competitors' performance.
(See page(s) p. 13, 539)

bottleneck Operation where the work required limits production.

 (See page(s) p. 92)

break-even point Volume level at which profits equal zero.

(See page(s) p. 70)

budget Financial plan of the resources needed to carry out activities

and meet financial goals.
(See page(s) p. 8, 363)

budgeted balance Statements of budgeted financial position.

sheets (See page(s) p. 379)

business-level strategy Organization's plan to compete in each of its businesses.

(See page(s) p. 534)

business model Description of how different levels and employees in the

organization must perform for the organization to achieve
its goals.
(See page(s) p. 535)

by-products Outputs of joint production processes that are relatively

minor in quantity or value.
(See page(s) p. 316)

cash budget Statement of cash on hand at the start of the budget period,
expected cash receipts, expected cash disbursements, and
the resulting cash balance at the end of the budget period.
(See page(s) p. 376)

centralized Describes those organizations in which decisions are made

by a relatively few individuals in the high ranks of the
organization.
(See page(s) p. 338)
coefficient of Square of the correlation coefficient, interpreted as the
determination proportion of the variation in the dependent variable
explained by the independent variable(s).
(See page(s) p. 115)

compensation and Specification of how the subordinate will be compensated

reward system for his or her performance based on the measured
performance.
(See page(s) p. 341)

conformance to Degree to which a good or service meets specifications.

specification (See page(s) p. 284)

constraints Activities, resources, or policies that limit or bound the

attainment of an objective.
(See page(s) p. 89)

contingent Compensation that is based on measured performance

compensation (See page(s) p. 348)

continuous flow System that generally massproduces a single, homogeneous

processing output in a continuing process.
(See page(s) p. 152)

continuous Continuous reevaluation and improvement of the efficiency

improvement of activities.
(See page(s) p. 539)

contribution margin Sales price – Variable costs per unit.

(See page(s) p. 46)

contribution margin Contribution margin per unit of a particular input with

per unit of scarce limited availability.
resource (See page(s) p. 89)

contribution margin Contribution margin as a percentage of sales revenue.

ratio (See page(s) p. 70)

control account Account in the general ledger that summarizes a set of

subsidiary ledger accounts.
(See page(s) p. 164)

controllability Extent to which an item can be managed.

(See page(s) p. 517)

controllability concept Idea that managers should be held responsible for costs or
profits over which they have decisionmaking authority.
(See page(s) p. 347)

conversion costs Sum of direct labor and manufacturing overhead.

(See page(s) p. 34)

correlation coefficient Measure of the linear relation between two or more

variables, such as cost and some measure of activity.
(See page(s) p. 115)

cost Sacrifice of resources.

(See page(s) p. 29)

cost accounting Field of accounting that measures, records, and reports

information about costs.
(See page(s) p. 10)

cost allocation Process of assigning indirect costs to products, services,

 people, business units, etc.
(See page(s) p. 35)

cost allocation rule Method used to assign costs in the cost pool to the cost
objects.
(See page(s) p. 36)

cost-benefit analysis Process of comparing benefits (often measured in savings or

increased profits) with costs associated with a proposed
change within an organization.
(See page(s) p. 6)

cost center Organization subunit responsible only for costs.

(See page(s) p. 342)

cost driver Factor that causes, or "drives," costs.

(See page(s) p. 6, 240)

cost flow diagram Diagram or flowchart illustrating the cost allocation

process.
(See page(s) p. 36)

cost hierarchy Classification of cost drivers into general levels of activity,

volume, batch, product, and so on.
(See page(s) p. 243)

cost management System to provide information about the costs of process,

system products, and services used and produced by an
organization.
(See page(s) p. 139)

cost object Any end to which a cost is assigned; examples include a

product, a department, or a product line.
(See page(s) p. 35)
cost of capital Cost of debt and equity used to finance a project or an
operation (e.g., product or product line).
(See page(s) p. 408)

cost of invested capital Cost of capital multiplied by the assets invested.

(See page(s) p. 408)

cost of goods sold Expense assigned to products sold during a period.

(See page(s) p. 32)

cost-plus transfer Transfer pricing policy based on full costing or variable

pricing costing and actual cost or standard cost plus an allowance
for profit.
(See page(s) p. 440)

cost pool Collection of costs to be assigned to the cost objects.

(See page(s) p. 35)

cost structure Proportion of fixed and variable costs to total costs of an

organization.
(See page(s) p. 73)

cost variance analysis Comparison of actual input amounts and prices with
standard input amounts and prices.
(See page(s) p. 468)

cost-volume-profit Study of the relations among revenues, costs, and volume

(CVP) analysis and their effect on profit.
(See page(s) p. 67)

critical success factors Strengths of a company that enable it to outperform

 competitors.
(See page(s) p. 363)

current cost Cost to replace or rebuild an existing asset.

(See page(s) p. 413)

customer expectations Customer's anticipated level of product or service (including

of quality tangible and intangible features).
(See page(s) p. 284)

death spiral Process that begins by attempting to increase price to meet

reported product costs, losing market, reporting still higher
costs, and so on, until the firm is out of business.
(See page(s) p. 233)

decentralization Delegation to a subordinate of decisionmaking authority.

(See page(s) p. 338)

decentralized Describes those organizations in which decisions are spread

among relatively many divisional and departmental
managers.
(See page(s) p. 338)

delegated decision Specification of the authority to make decisions in the

authority organization's name.
(See page(s) p. 341)

Delphi technique Forecasting method in which individual forecasts of group

members are submitted anonymously and evaluated by the
group as a whole.
(See page(s) p. 367)

department allocation Allocation method that has a separate cost pool for each
method department, which has its own overhead allocation rate or
 set of rates.
(See page(s) p. 238)

dependent variable Y term or the left-hand side of a regression equation.

(See page(s) p. 114)

differential analysis Process of estimating revenues and costs of alternative

actions available to decision makers and of comparing these
estimates to the status quo.
(See page(s) p. 78)

differential costs Costs that change in response to a particular course of

action.
(See page(s) p. 7)

differential revenues Revenues that change in response to a particular course of

action.
(See page(s) p. 7)

direct cost Any cost that can be directly (unambiguously) related to a

cost object.
(See page(s) p. 36)

direct labor Work that actually transforms materials into finished

products during the production process.
(See page(s) p. 33)

direct manufacturing Product costs that can be feasibly identified with units of
costs production.
(See page(s) p. 33)

direct materials Those materials that can feasibly be identified directly with
the product.
(See page(s) p. 33)
direct method Cost allocation method that charges costs of service
departments to user departments without making allocations
between or among service departments.
(See page(s) p. 301)

discount rate Interest rate used to compute net present values.

(See page(s) p. 553)

discretionary cost Organization subunit whose managers are held responsible

center for costs where the relationship between costs and outputs is
not well established.
(See page(s) p. 342)

disinvestment flows Cash flows that take place at the termination of a capital
project.
(See page(s) p. 557)

divisional income Divisional revenues minus divisional costs.

(See page(s) p. 402)

dual rate method Cost allocation method that separates a common cost into
fixed and variable components and then allocates each
component using a different allocation base.
(See page(s) p. 350)

dual transfer pricing Transfer pricing system that charges the buying division
with costs only and credits the selling division with cost
plus some profit allowance.
(See page(s) p. 441)

dysfunctional decision Decisions made in the interest of local managers, that are
making not in the interests of the organization.
(See page(s) p. 339)
econometric models Statistical methods of forecasting economic data using
regression models.
(See page(s) p. 368)

economic value added (EVA®) Annual after-tax (adjusted) operating profit minus
the total annual cost of (adjusted) capital.
(See page(s) p. 410)

efficiency variance Difference between budgeted and actual results arising from
differences between the inputs that were budgeted per unit
of output and the inputs actually used.
(See page(s) p. 468)

engineering estimate Cost estimate based on measurement and pricing of the

work involved in a task.
(See page(s) p. 108)

enterprise resource Information technology that links the various systems of the
planning (ERP) enterprise into a single comprehensive information system.
(See page(s) p. 14)

equivalent units Number of complete physical units to which units in

inventories are equal in terms of work done to date.
(See page(s) p. 194)

estimated net realizable Sales price of a final product minus additional processing
value costs necessary to prepare a product for sale.
(See page(s) p. 312)

expense Cost that is charged against revenue in an accounting

period.
(See page(s) p. 30)
external failure costs Costs incurred when nonconforming products and services
are detected after being delivered to customers.
(See page(s) p. 285)

favorable variance Variance that, taken alone, results in an addition to

operating profit.
(See page(s) p. 460)

final cost center Cost center, such as a production or marketing department,

whose costs are not allocated to another cost center.
(See page(s) p. 300)

financial accounting Field of accounting that reports financial position and

income according to accounting rules.
(See page(s) p. 10)

financial budgets Budgets of financial resources; for example, the cash budget
and the budgeted balance sheet.
(See page(s) p. 459)

finished goods Product fully completed, but not yet sold.

(See page(s) p. 37)

first-in, first-out (FIFO) Inventory method whereby the first goods received are the
process costing first ones charged out when sold or transferred.
(See page(s) p. 197)

fixed compensation Compensation that is not directly linked to measured

performance.
(See page(s) p. 348)

fixed costs Costs that are unchanged as volume changes within the
 relevant range of activity.
(See page(s) p. 42)

flexible budget Budget that indicates revenues, costs, and profits for
different levels of activity.
(See page(s) p. 461)

flexible budget line Expected monthly costs at different output levels.

(See page(s) p. 462)

flexible production Standard input price times standard quantity of input

budget allowed for actual good output.
(See page(s) p. 470)

full absorption cost All variable and fixed manufacturing costs; used to compute
a product's inventory value under GAAP.
(See page(s) p. 43)

full cost Sum of all costs of manufacturing and selling a unit or

product (includes both fixed and variable costs).
(See page(s) p. 43, 79)

generally accepted Rules, standards, and conventions that guide the preparation
accounting principles of financial accounting statements for shareholders.
(GAAP) (See page(s) p. 11)

goal congruence When all members of a group hold a common set of

objectives.
(See page(s) p. 344)

gross margin Revenue ÷ Cost of goods sold on income statements. Per

unit, the gross margin equals Sales price – Full absorption
cost per unit.
(See page(s) p. 45)
gross margin ratio Gross margin divided by sales.
(See page(s) p. 403)

high-low cost Method to estimate costs based on two cost observations,

estimation usually at the highest and lowest activity levels.
(See page(s) p. 111)

historical cost Original cost to purchase or build an asset.

(See page(s) p. 413)

impact Likely monetary effect from an activity (such as a variance).

(See page(s) p. 517)

independent variable X term, or predictor, on the righthand side of a regression

equation.
(See page(s) p. 114)

indirect cost Any cost that cannot be directly related to a cost object.
(See page(s) p. 36)

indirect manufacturing All product costs except direct costs.

costs (See page(s) p. 33)

industry volume Portion of the sales activity variance due to changes in

variance industry volume.
(See page(s) p. 508)

intermediate cost Cost center whose costs are charged to other departments in
center the organization.
(See page(s) p. 300)
internal failure costs Costs incurred when nonconforming products and services
are detected before being delivered to customers.
(See page(s) p. 285)

inventoriable costs Costs added to inventory accounts.

(See page(s) p. 37)

investment center Organization subunit responsible for profits and for

investment in assets.
(See page(s) p. 343)

investment tax credit Reduction in federal income taxes arising from the purchase
(ITC) of certain assets.
(See page(s) p. 556)

job Units of a product that are easily distinguishable from other

units.
(See page(s) p. 151, 163)

job cost sheet Record of the cost of the job kept in the accounting system.
(See page(s) p. 163)

job costing Accounting system that traces costs to individual units or to

specific jobs, contracts, or batches of goods.
(See page(s) p. 151)

job shop Firm that produces jobs.

(See page(s) p. 163)

joint cost Cost of a manufacturing process with two or more outputs.

(See page(s) p. 311)
joint products Outputs from a common input and common production
process.
(See page(s) p. 311)

just-in-time (JIT) In production or purchasing, each unit is purchased or

method produced just in time for its use.
(See page(s) p. 13)

local knowledge Information about local conditions, markets, regulations,

and so on.
(See page(s) p. 339)

make-or-buy decision Decision concerning whether to make needed goods

internally or purchase them from outside sources.
(See page(s) p. 83)

management by Approach to management requiring that reports emphasize

exception the deviation from an accepted base point, such as a
standard, a budget, an industry average, or a prior period
experience.
(See page(s) p. 517)

management control System to influence subordinates to act in the organization's

system interests
(See page(s) p. 340)

manufacturing cycle Measure of the efficiency of the total manufacturing cycle;

efficiency equals processing time divided by the manufacturing cycle
time.
(See page(s) p. 544)

manufacturing cycle Time involved in processing, moving, storing, and

time inspecting products and materials.
(See page(s) p. 544)
manufacturing All production costs except direct labor and direct materials.
overhead (See page(s) p. 33)

market price-based Transfer pricing policy that sets the transfer price at the
transfer pricing market price or at a small discount from the market price.
(See page(s) p. 439)

market share variance Portion of the activity variance due to change in the
company's proportion of sales in the markets in which the
company operates.
(See page(s) p. 508)

marketing costs Costs required to obtain customer orders and provide

customers with finished products, including advertising,
sales commissions, and shipping costs.
(See page(s) p. 34)

master budget Financial plan of an organization for the coming year or

other planning period.
(See page(s) p. 364)

mission Organization's purpose.

(See page(s) p. 534)

mission statement Description of an organization's values, definition of its

responsibilities to stakeholders, and identification of its
major strategies.
(See page(s) p. 534)

negotiated transfer System that arrives at transfer prices through negotiation

pricing between managers of buying and selling divisions.
(See page(s) p. 441)
net present value Economic value of a project at a point in time.
(NPV) (See page(s) p. 553)

net realizable value Joint cost allocation based on the proportional values of the
method joint products at the split-off point.
(See page(s) p. 312)

nonvalue-added Activities that do not add value to the good or service.

activities (See page(s) p. 5)

normal activity Long-run expected volume.

(See page(s) p. 280)

normal cost Cost of job determined by actual direct material and labor
cost plus overhead applied using a predetermined rate and
an actual allocation base.
(See page(s) p. 172)

operating budgets Budgeted income statement, production budget, budgeted

cost of goods sold, and supporting budgets.
(See page(s) p. 459)

operating leverage Extent to which an organization's cost structure is made up

of fixed costs.
(See page(s) p. 74)

operating margin ratio Operating income divided by sales.

(See page(s) p. 403)

operating profit Excess of operating revenues over the operating costs

necessary to generate those revenues.
(See page(s) p. 30)
operation Standardized method or technique of making a product that
is repeatedly performed.
(See page(s) p. 152, 209)

operation costing Hybrid costing system used in manufacturing goods that

have some common characteristics and some individual
characteristics.
(See page(s) p. 152, 209)

opportunity cost Forgone benefit from the best (forgone) alternative course
of action.
(See page(s) p. 30)

organization goals Company's broad objectives established by management

that employees work to achieve.
(See page(s) p. 364)

outlay cost Past, present, or future cash outflow.

(See page(s) p. 30)

overapplied overhead Excess of applied overhead costs incurred over actual

overhead during a period.
(See page(s) p. 171)

participative Use of input from lower- and middle-management

budgeting employees; also called grass roots budgeting.
(See page(s) p. 366)

performance evaluation System and specification of how the subordinate will be

system evaluated.
(See page(s) p. 341)
performance measure Metric that indicates how well an individual, business unit,
product, firm, and so on, is working.
(See page(s) p. 14)

period costs Costs recognized for financial reporting when incurred.

(See page(s) p. 33)

physical quantities Joint cost allocation based on measurement of the volume,

method weight, or other physical measure of the joint products at
the split-off point.
(See page(s) p. 315)

planned variance Variance that is expected to occur if certain conditions

affect operations.
(See page(s) p. 518)

plantwide allocation Allocation method by using one cost pool for the entire
method plant. It uses one overhead allocation rate, or one set of
rates, for all of a plant's departments.
(See page(s) p. 238)

practical capacity Amount of production possible assuming only the expected

downtime for scheduled maintenance and normal breaks
and vacations.
(See page(s) p. 280)

predetermined Cost per unit of the allocation base used to charge overhead
overhead rate to products.
(See page(s) p. 146)

present value Amounts of future cash flows discounted to their equivalent

worth today.
(See page(s) p. 554)
prevention costs Costs incurred to prevent defects in the products or services
being produced.
(See page(s) p. 284)

price variance Difference between actual costs and budgeted costs arising
from changes in the cost of inputs to a production process or
other activity.
(See page(s) p. 468)

prime costs Sum of direct materials and direct labor.

(See page(s) p. 34)

principal-agent Relationship between a superior referred to as the principal,

relationship and a subordinate, called the agent.
(See page(s) p. 338)

prior department costs Manufacturing costs incurred in some other department and
transferred to a subsequent department in the manufacturing
process.
(See page(s) p. 206)

process costing Accounting system used when identical units are produced
through a series of uniform production steps.
(See page(s) p. 151)

product costs Costs assigned to the manufacture of products and

recognized for financial reporting when sold.
(See page(s) p. 33)

product life cycle Time from initial research and development to the time that
support to the customer ends.
(See page(s) p. 82)
production budget Production plan of resources needed to meet current sales
demand and ensure that inventory levels are sufficient for
future sales.
(See page(s) p. 368)

production cost report Report that summarizes production and cost results for a
period; generally used by managers to monitor production
and cost flows.
(See page(s) p. 199)

production mix Variance that arises from a change in the relative proportion
variance of inputs (a materials or labor mix variance).
(See page(s) p. 512)

production volume Variance that arises because the volume used to apply fixed
variance overhead differs from the estimated volume used to estimate
fixed costs per unit.
(See page(s) p. 476)

production yield Difference between expected output from a given level of

variance inputs and the actual output obtained from those inputs.
(See page(s) p. 513)

profit center Organization subunit responsible for profits; thus

responsible for revenues, costs, production, and sales
volumes.
(See page(s) p. 342)

profit equation Operating profit equals total revenue less total costs.
(See page(s) p. 67)

profit margin ratio After-tax income divided by sales.

(See page(s) p. 403)
profit plan Income statement portion of the master budget.
(See page(s) p. 364)

profit variance Analysis of the causes of differences between budgeted

analysis profits and the actual profits earned.
(See page(s) p. 464)

profit-volume analysis Version of cost-volume-profit analysis using a single profit

line.
(See page(s) p. 72)

project Complex job that often takes months or years to complete

and requires the work of many different departments,
divisions, or subcontractors.
(See page(s) p. 176)

purchase price Price variance based on the quantity of materials purchased.

variance (See page(s) p. 507)

reciprocal method Method to allocate service department costs that recognizes

all services provided by any service department, including
services provided to other service departments.
(See page(s) p. 307)

regression Statistical procedure to determine the relation between

variables.
(See page(s) p. 113)

relative performance Managerial evaluation method that compares divisional

evaluation (RPE) performance with that of peer group divisions (i.e.,
divisions operating in similar product markets).
(See page(s) p. 347)

relevant range Activity levels within which a cost estimate is valid; in

 particular the range within which a given fixed or unit
variable cost will be unchanged even though volume
changes.
(See page(s) p. 42, 111)

residual income (RI) Excess of actual profit over the cost of capital invested in
the unit.
(See page(s) p. 408)

resources supplied Expenditures or the amounts spent on a specific activity.

(See page(s) p. 278)

resources used Determined by multiplying the cost driver rate by the cost
driver volume.
(See page(s) p. 278)

responsibility System of reporting tailored to an organizational structure

accounting so that costs and revenues are reported at the level having
the related responsibility within the organization.
(See page(s) p. 342)

responsibility center Specific unit of an organization assigned to a manager who

is held accountable for its operations and resources.
(See page(s) p. 7)

return on investment Ratio of profits to investment in the asset that generates

(ROI) those profits.
(See page(s) p. 404)

revenue center Organization subunit responsible for revenues and,

typically, for marketing costs.
(See page(s) p. 342)

sales activity variance Difference between operating profit in the master budget
 and operating profit in flexible budget that arises because
the actual number of units sold is different from the
budgeted number; also known as sales volume variance.
(See page(s) p. 463)

sales mix variance Variance arising from the relative proportion of different
products sold.
(See page(s) p. 509)

sales price variance Difference between actual revenue and actual units sold
multiplied by budgeted selling price.
(See page(s) p. 466)

sales quantity Variance occurring in multiproduct companies from the

variances change in volume of sales, independent of any change in
mix.
(See page(s) p. 510)

scattergraph Graph that plots costs against activity levels.

(See page(s) p. 111)

semivariable cost Cost that has both fixed and variable components; also
called mixed cost.
(See page(s) p. 42)

service department Department that provides service to other subunits in the

organization.
(See page(s) p. 299)

short run Period of time over which capacity will be unchanged,

usually one year.
(See page(s) p. 78)

six sigma System for improving quality that relies on using data to
 identify and quantify process improvements.
(See page(s) p. 14)

special order Order that will not affect other sales and is usually a short-
run occurrence.
(See page(s) p. 80)

spending (or budget) Price variance for fixed overhead.

variance (See page(s) p. 475)

split-off point Stage of processing when two or more products are

separated.
(See page(s) p. 311)

stakeholders Groups or individuals, such as employees, suppliers,

customers, shareholders, and the community, who have an
interest in what the organization does.
(See page(s) p. 535)

standard cost Cost of job determined by standard (budgeted) direct

material and labor cost plus overhead applied using a
predetermined overhead rate and a standard (budgeted)
allocation base.
(See page(s) p. 172)

standard cost center Organization subunit whose managers are held responsible
for costs and in which the relationship between costs and
output is well defined.
(See page(s) p. 342)

standard cost sheet Form providing standard quantities of inputs used to

produce a unit of output and the standard prices for the
inputs.
(See page(s) p. 467)
standard costing Accounting method that assigns costs to cost objects at
predetermined amounts.
(See page(s) p. 481)

static budget Budget for a single activity level; usually the master budget.
(See page(s) p. 461)

step cost Cost that increases with volume in steps; also called
semifixed cost.
(See page(s) p. 43)

step method Method of service department cost allocation that allocates

some service department costs to other service departments.
(See page(s) p. 305)

strategic long-range Statement detailing steps to take to achieve a company's

plan organization goals.
(See page(s) p. 364)

subsidiary ledger Account that records financial transactions for a specific

account customer, vendor, or job.
(See page(s) p. 164)

sunk cost Cost incurred in the past that cannot be changed by present
or future decisions.
(See page(s) p. 78)

supply chain Linked set of firms that exchange goods or services in

combination to provide a final product or service to the
consumer.
(See page(s) p. 4)

t-statistic t is the value of estimated coefficient, b, divided by its

 standard error.
(See page(s) p. 116)

target cost Equals the target price minus desired profit margin.
(See page(s) p. 83)

target price Price based on customers' perceived value for the product
and the price that competitors charge.
(See page(s) p. 83)

tax basis Remaining tax-depreciable "book value" of an asset for tax

purposes.
(See page(s) p. 558)

tax shield Reduction in tax payment because of depreciation deducted

for tax purposes.
(See page(s) p. 557)

theoretical capacity Amount of production possible under ideal conditions with

no time for maintenance, breakdowns, or absenteeism.
(See page(s) p. 280)

theory of constraints Focuses on revenue and cost management when faced with
(TOC) bottlenecks.
(See page(s) p. 91)

throughput Sales dollars minus direct materials costs and variables such
contribution as energy and piecework labor.
(See page(s) p. 92)

time value of money Concept that cash received earlier is worth more than cash
received later.
(See page(s) p. 553)
total contribution Difference between revenues and total variable costs.
margin (See page(s) p. 68)

total cost variance Difference between budgeted and actual results (equal to the
sum of the price and efficiency variances).
(See page(s) p. 468)

total quality Management method by which the organization seeks to

management (TQM) excel on all dimensions, with the customer ultimately
defining quality.
(See page(s) p. 13)

transfer price Value assigned to the goods or servicesn sold or rented

(transferred) from one unit of an organization to another.
(See page(s) p. 429)

trend analysis Forecasting method that ranges from simple visual

extrapolation of points on a graph to highly sophisticated
computerized time series analysis.
(See page(s) p. 367)

two-stage cost Process of first allocating costs to intermediate cost pools

allocation and then to the individual cost objects using different
allocation bases.
(See page(s) p. 149)

underapplied Excess of actual overhead costs incurred over applied

overhead overhead costs.
(See page(s) p. 171)

unfavorable variance Variance that, taken alone, reduces operating profit.

(See page(s) p. 460)
unit contribution Difference between revenues per unit (price) and variable
margin costs per unit.
(See page(s) p. 68)

unused resource Difference between resources used and resources supplied.

capacity (See page(s) p. 278)

user department Department that uses the functions of service departments.

(See page(s) p. 299)

value-added activities Those activities that customers perceive as adding utility to

the goods or services they purchase.
(See page(s) p. 3)

value chain Linked set of activities that increases the usefulness (or
value) of the goods or services of an organization.
(See page(s) p. 3)

variable costs Costs that change in direct proportion with a change in

volume within the relevant range of activity.
(See page(s) p. 42)

variance Difference between planned result and actual outcome.

(See page(s) p. 459)

weighted-average Inventory method that for product costing purposes

process costing combines costs and equivalent units of a period with the
costs and the equivalent units in beginning inventory.
(See page(s) p. 197)

working capital Cash, accounts receivable, and other shortterm assets

required to maintain an activity.
(See page(s) p. 556)
work in process Product in the production process but not yet complete.
(See page(s) p. 37)