Cost: Cost refers to the cost of production and operations.

Cost is the monetary measure (cash)

that has been given up in order to buy an asset.

Expense: Expense refers to fixed monthly expenses such as rent, utilities, and other fixed
expenses. An expense is a cost that has expired or been taken up by activities that help generate
revenue. Therefore, all expenses are costs, but not all costs are expenses.

Semi Variable: A semi-variable cost, also known as a semi-fixed cost or a mixed cost, is a cost
composed of a mixture of both fixed and variable components. Costs are fixed for a set level of
production or consumption and become variable after this production level is exceeded.

Step Variable: A step variable cost is a cost that generally varies with the level of activity, but
tends to be incurred at certain discrete points and involves large changes in amounts when such a
point is reached.

Fixed Expense: In accounting and economics, fixed costs, also known as indirect costs or
overhead costs, are business expenses that are not dependent on the level of goods or services
produced by the business.

Variable Expense: Variable costs are costs that change as the quantity of the good or service that
a business produces changes. Variable costs are the sum of marginal costs over all units
produced.

Prime Cost: A prime cost is the total direct costs of production, including raw materials and
labour. Prime Costs = Direct Materials + Direct Labors + Direct Expenses

Conversion Cost: Conversion cost is the cost incurred by any manufacturing entity in converting
its raw material into finished goods capable of being sold in the market.

Factory Overhead: It is the total cost involved in operating all production facilities of a
manufacturing business that cannot be traced directly to a product. It generally applies to indirect
labour and indirect cost.

Direct and Indirect Material: Direct materials are those items consumed in the production
process, that can be easily identified and directly traced to the production of a specific product.
They are generally the core materials required for manufacturing a product and form part of the
final product.
Indirect materials are those materials that cannot be directly traced or correlated to the
production of a specific product. Such materials are generally used in some aspects of the
production process but do not necessarily become an identifiable part of the final manufactured
product.

Direct and Indirect Wages: Direct labour includes all labor that varies with production volume.
This means the classification is generally limited to those people working on an assembly line or
operating production machinery. Indirect labor is all types of support and supervisory labor, such
as janitorial, maintenance, administrative, and management employees. Indirect labor is much
less likely to change with production volume, since it represents the overhead of a business that
is needed to support any level of operations.

EOQ: Economic order quantity (EOQ) is the ideal order quantity a company should purchase to
minimize inventory costs such as holding costs, shortage costs, and order costs.

Ordering Cost: Ordering costs are the expenses your company incurs to purchase and receive the
products it stocks in its inventory.

Carrying and Storage Cost: Carrying and storage costs are the various costs a business pays for
holding and carrying inventory in stock.

Re-Order Level: reorder stock level is the level of inventory at which a new purchase order
should be placed.

Bin Card: Bin cards, which are sometimes referred to as inventory cards or stock cards, are
record-keeping documents used in retail and other businesses that require a stock room. They
keep a running balance of a business's inventory.

Store Ledger: Stores Ledger is a ledger account (accounting record), that maintains the record of
the transit of goods in and out, of the stores, both in quantitative and monetary terms.

Piece Rate with Guaranteed Hourly Rate: Piece rate pay occurs when workers are paid by the
unit performed instead of being paid on the basis of time spent on the job. However, there is a
minimum pay that is guaranteed to be paid regardless of how few unit are produced.

Halsey Premium Plan: Under Halsey premium plan method, standard time for doing each job or
operation is fixed and the worker is given wages for the actual time he takes to complete the job
or operation at the agreed rate per hour plus a bonus equal to (usually) one-half of the wages of
the time saved.

Rowan Premium Plan: Rowan Premium Plan: This plan was introduced by James Rowan. Under
this method, the standard time and the standard rate of wage Payment are determined in the same
manner as Halsey Plan. The workers, who complete their work within standard time, are paid the
wages at standard rate.

Differential Time Rate System: a method of wage payment whereby after tests have set a
standard time for a task the worker receives a high piece rate for doing the job in task time and a
lower piece rate for taking longer than task time.

Predetermined Factory Overhead Rate: a method of wage payment whereby after tests have set a
standard time for a task the worker receives a high piece rate for doing the job in task time and a
lower piece rate for taking longer than task time.

Primary Distribution of Factory Overhead: Primary distribution of overheads refers to the

allocation and apportionment of overhead expenses among the production and service
departments of an organization.

Secondary Distribution of Factory Overhead: The process of redistributing the cost of service
departments among production departments is known as secondary distribution. Here, the cost of
the service department means the apportioned overheads plus direct materials plus direct labour
and direct expenses of the concerned service department.

Machine Hour Rate: A machine hour rate is an hourly cost in terms of factory overheads to
operate a particular machine. It is obtained by dividing the factory expenses associated with the
machine for a given period by the number of hours worked by the machine during that period.

Job Costing: Job costing is an accounting method designed to help you track the cost of
individual projects and jobs. It involves looking at direct and indirect costs, and it's usually
broken into three specific categories: labour, materials and overhead.

Normal Loss: Normal loss is the loss that occurs due to the nature of the goods consigned.

Abnormal Loss: Abnormal loss is referred to as the loss that is faced by a company which is
beyond the normal loss threshold.

Equivalent Unit: An equivalent unit of production is an expression of the amount of work done
by a manufacturer on units of output that are partially completed at the end of an accounting
period. Basically the fully completed units and the partially completed units are expressed in
terms of fully completed units.

Contribution Margin: Contribution margin shows you the aggregate amount of revenue available
after variable costs to cover fixed expenses and provide profit to the company
BEP: The breakeven point is the level of production at which the costs of production equal the
revenues for a product.

Margin of Safety: Alternatively, in accounting, the margin of safety, or safety margin, refers to
the difference between actual sales and break-even sales. Managers can utilize the margin of
safety to know how much sales can decrease before the company or a project becomes
unprofitable.

Degree of Operating Leverage: The degree of operating leverage measures how much a
company's operating income changes in response to a change in sales.

Flexible Budget: A flexible budget is one based on different volumes of sales. A flexible budget
flexes the static budget for each anticipated level of production. This flexibility allows
management to estimate what the budgeted numbers would look like at various levels of sales.

Budget: A budget is an estimation of revenue and expenses over a specified future period of time

Variance: A variance in accounting is the difference between a forecasted amount and the actual
amount.

Material Variance: This is the difference between the actual cost incurred for direct materials and
the expected (or standard) cost of those materials.

Sunk Cost: a cost that has already been incurred and that cannot be recovered.

Relevant Cost: Relevant cost is a managerial accounting term that describes avoidable costs that
are incurred only when making specific business decisions.

Opportunity Cost: Opportunity cost is the forgone benefit that would have been derived from an
option not chosen.

Make or Buy Decision: A make-or-buy decision is an act of choosing between manufacturing a

product in-house or purchasing it from an external supplier. Make-or-buy decisions, like
outsourcing decisions, speak to a comparison of the costs and advantages of producing in-house
versus buying it elsewhere.

Margin: In business accounting, margin refers to the difference between revenue and expenses,
where businesses typically track their gross profit margins, operating margins, and net profit
margins.
Turnover: turnover is an accounting concept that calculates how quickly a business conducts its
operations. Most often, turnover is used to understand how quickly a company collects cash from
accounts receivable or how fast the company sells its inventory.

ROI: Return on investment or return on costs is a ratio between net income and investment. A
high ROI means the investment's gains compare favourably to its cost.

Throughput Time: Throughput time refers to the total amount of time that it takes to run a
particular process in its entirety from start to finish. For example, a manufacturer can measure
how long it takes to produce a product, from initial customer order to sourcing raw materials to
manufacturing to sale.

Delivery Cycle TIme: Delivery cycle time is the time span between the acceptance of an order
from a customer to the ultimate delivery of the product to the customer.

Manufacturing Cycle Efficiency: Manufacturing cycle efficiency measures the proportion of

production time spent on value-added activities.

Profit Centre: A profit center is a branch or division of a company that directly adds or is
expected to add to the entire organization's bottom line. Examples: Individual restaurants in a
large restaurant chain. Manufacturing divisions in a large corporations. Individual retail stores in
a large retail chain.

Cost Centre and Investment centre : A cost center is a department or function within an
organization that does not directly add to profit but still costs the organization money to operate.
Responsibility centers are categorized depending on the level of control over revenues, costs, or
investments. A segment responsible only for costs is called a cost center. A segment responsible
for costs and revenues is called a profit center. A segment responsible for costs, revenues, and
investment in assets is called an investment center.