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BUS 254 (50)
Chapter 2

Chapter 2 Basic Cost Management Concepts.docx

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Simon Fraser University
Business Administration
BUS 254
Michelle Iorio

Bus 254 Managerial Accounting Chapter 2 Chapter 2: Basic Cost Management Concepts Activity A measure of an organization’s output of goods or services Average cost per unit The total cost of producing a particular quantity of product divided by the number of units produced Controllable cost A cost subject to the control or substantial influence of a particular individual Conversion costs Direct-labour cost plus manufacturing-overhead cost Cost driver A characteristic of an activity or event that results in the incurrence of costs by that activity or event Cost object Responsibility centre, product or service to which a cost is assigned Costs of goods manufactured The total cost of direct material, direct labour, and manufacturing overhead transferred from work-in-process inventory to finished-goods inventory during an accounting period Cost of goods sold The expense measured by the cost of the finished goods sold during a period of time Differential cost The difference in a cost item under two decision alternatives Direct cost A cost that can be traced to a particular department or other subunit of an organization Direct labour The costs of compensating employees who work directly on a firm’s product. Should include wages, salary and associated fringe benefits Direct material Raw material that is physically incorporated into the finished product Expense The consumption of assets for the purpose of generating revenue Finished-goods inventory The products in a manufacturer’s inventory that are completed and are waiting to be sold Fixed cost A cost that does not change in total as activity changes Idle time Unproductive time spent by employees due to factors beyond their control, such as power outages and machine breakdowns Incremental cost The increase in cost from one alternative to another Indirect cost A cost that cannot be traced to a particular department Indirect labour All costs of compensating employees who do not work directly on the firm’s product but who are necessary for production to occu Indirect material Material that either is required for the production process to occur but does not become an integral part o
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