Glossary.

A
A8C]A8M cross look aL Lhe page 196
Absorpt|on cost (or fu|| absorpt|on cost) Lhe meLhod of accounLlng for lnvenLory LhaL asslgns all
producLlon cosLs Lo lnvenLory (because all producLlon cosLs are sald Lo be fully absorbed lnLo Lhe cosL of Lhe
producL) (p132)
Account|ng rate of return ls Lhe average annual lncrease ln neL lncome LhaL resulLs from Lhe accepLance of
a caplLal expendlLure proposal dlvlded by elLher Lhe lnlLlal lnvesLmenL or Lhe average lnvesLmenL ln Lhe
pro[ecL (p421)
Act|v|ty ls a unlL of work (p14)
Act|v|ty based management (A8M) deflned as Lhe ldenLlflcaLlon and selecLlon of acLlvlLles Lo maxlmlze Lhe
value of Lhe acLlvlLles whlle mlnlmlzlng Lhelr cosL from Lhe perspecLlve of Lhe flnal consumer (p193)
Act|v|ty cost dr|vers Speclflc unlLs of work (acLlvlLles) performed Lo serve cusLomer needs LhaL consume
cosLly resources (p14)
Act|v|tybased approach (budget|ng) ls a Lype of ouLpuL/lnpuL meLhod buL lL reduces Lhe dlsLorLlons ln
Lhe LransformaLlon Lhrough emphasls on Lhe expecLed cosL of Lhe planned octlvltles LhaL wlll be consumed
for a process deparLmenL servlce producL or oLher budgeL ob[ecLlve (p290)
Act|v|tybased cost|ng lnvolves deLermlnlng Lhe cosL of acLlvlLles and Lraclng Lhelr cosLs Lo cosL ob[ecLlves
on Lhe basls of Lhe cosL ob[ecLlves uLlllzaLlon of unlLs of acLlvlLy (p177)
Appra|sa| costs are lncurred Lo ldenLlfy nonconformlng producLs or servlces before Lhey are dellvered Lo
cusLomers (p270)
as acLlvlLy lncreases equallng zero dollars when acLlvlLy ls zero and lncreaslng aL a consLanL amounL per unlL
of acLlvlLy 1he hlgher Lhe varlable cosL per unlL of acLlvlLy Lhe sLeeper Lhe slope of Lhe llne represenLlng
LoLal cosL (p28)
Avo|dab|e common costs are allocaLed common cosLs LhaL evenLually can be avolded (LhaL ls can be
ellmlnaLed) lf a segmenL ls dlsconLlnued lf all allocaLed common cosLs are avoldable Lhe effecL of
dlsconLlnulng Lhe segmenL on corporaLe proflLablllLy equals Lhe amounL of segmenL lncome (p373)

8
8ackf|ush cost|ng all cosLs of dlrecL maLerlals dlrecL labor and manufacLurlng overhead are asslgned as
lncurred Lo CosL of Coods Sold lf Lhere are no lnvenLorles on hand aL Lhe end of Lhe perlod no addlLlonal
sLeps are requlred (p234)
8a|anced scorecard ls a performance measuremenL sysLem LhaL lncludes flnanclal and operaLlonal
measures relaLed Lo a flrms goals and sLraLegles (p386)
8atch|eve| act|v|ty ls performed for each baLch of producL produced 8aLchlevel acLlvlLles lnclude seLLlng
up Lhe machlnes Lo sLamp each fork ln an ldenLlcal manner movlng Lhe enLlre baLch beLween worksLaLlons
(le moldlng sLamplng and flnlshlng) and lnspecLlng Lhe flrsL unlL ln Lhe baLch Lo verlfy LhaL Lhe machlnes
are seL up correcLly) (p43)
8enchmark|ng ls now a sysLemaLlc approach Lo ldenLlfylng Lhe besL pracLlces Lo help an organlzaLlon Lake
acLlon Lo lmprove performance (p267)
8||| of mater|a|s speclfles Lhe klnds and quanLlLles of raw maLerlals requlred for one unlL of producL 1he
operaLlons llsL (someLlmes called an acLlvlLles llsL) speclfles Lhe manufacLurlng operaLlons and relaLed Llmes
requlred for one unlL or baLch of producL 1he operaLlons llsL should also lnclude lnformaLlon on any
machlne seLup Llme movemenLs beLween work areas and oLher scheduled acLlvlLles such as quallLy
lnspecLlons (p136)
8udgetary s|ack ls Lhe Lendency of some managers Lo lnLenLlonally undersLaLe revenues or oversLaLe
expenses Lo provlde (p303)
8udgeted f|nanc|a| statements are pro forma sLaLemenLs LhaL reflecL Lhe aslf effecLs of Lhe budgeLed
acLlvlLles on Lhe acLual flnanclal poslLlon of Lhe organlzaLlon (p299)

C
Capac|ty costs look commlLLed flxed cosLs
Cap|ta| budget|ng ls a process LhaL lnvolves ldenLlfylng poLenLlally deslrable pro[ecLs for caplLal
expendlLures evaluaLlng caplLal expendlLure proposals and selecLlng proposals LhaL meeL mlnlmum
crlLerla (p410)
Cap|ta| expend|tures are lnvesLmenLs of flnanclal resources ln pro[ecLs Lo develop or lnLroduce new
producLs or servlces Lo expand currenL producLlon or servlce capaclLy or Lo change currenL producLlon or
servlce faclllLles (p410)
Cha|ned target cost|ng because Lhe supply chalns supporL ls crlLlcal for Lhe producL Lo be boLh
compeLlLlvely prlced and dellvered Lo Lhe flnal cusLomer ln a Llmely manner (p264)
Coeff|c|ent of determ|nat|on ls a measure of Lhe percenL of varlaLlon ln Lhe dependenL varlable (such as
LoLal packaglng deparLmenL cosLs) LhaL ls explalned by varlaLlons ln Lhe lndependenL varlable (such as LoLal
shlpmenLs) SLaLlsLlclans ofLen refer Lo Lhe coefflclenL of deLermlnaLlon as 8squared and represenL lL as 8
2

(p38)
Comm|tted f|xed costs someLlmes referred Lo as capac|ty costs are Lhe flxed cosLs requlred Lo malnLaln
Lhe currenL servlce or producLlon capaclLy or Lo flll prevlous legal commlLmenLs (p33)
Common segment costs are lncurred for Lhe common beneflL of all relaLed segmenLs shown on a segmenL
lncome sLaLemenL (p373)
Cont|nuous budget|ng] ro|||ng budget Lhe budgeL ls based on a movlng Llme frame (p306)
Contr|but|on |ncome statement cosLs are classlfled accordlng Lo behavlor as varlable or flxed and Lhe
conLrlbuLlon margln (Lhe dlfference beLween LoLal revenues and LoLal varlable cosLs) LhaL goes Loward
coverlng flxed cosLs and provldlng a proflL ls emphaslzed (p63)
Contr|but|on marg|n Lhe dlfference beLween LoLal revenues and LoLal varlable cosLs (p63)
Contro|||ng ls Lhe process of ensurlng LhaL resulLs agree wlLh plans (p 12)
Convers|on cost conslsLs of Lhe comblned cosLs of dlrecL labor and manufacLurlng overhead lncurred Lo
converL raw maLerlals lnLo flnlshed goods (p133)
Cost behav|or Lhe relaLlonshlp beLween a glven cosL lLem and Lhe quanLlLy of lLs relaLed cosL drlver CosL
behavlor Lherefore explalns how Lhe LoLal amounLs for varlous cosLs respond Lo changes ln acLlvlLy volume
(p28)
Cost center ls a responslblllLy cenLer whose manager ls responslble for managlng only cosLs Lhere ls no
revenue responslblllLy (p333)
Cost dr|ver ana|ys|sLhe sLudy of facLors LhaL cause or lnfluence cosLs (p6)
Cost est|mat|on Lhe deLermlnaLlon of Lhe relaLlonshlp beLween acLlvlLy and cosL ls an lmporLanL parL of
cosL managemenL (p33)
Cost of cap|ta| ls Lhe average cosL an organlzaLlon pays Lo obLaln Lhe resources necessary Lo make
lnvesLmenLs (p417)
Cost of product|on report summarlzes unlL and cosL daLa for each deparLmenL or process for
each perlod conslsLs of Lhe followlng secLlons Summary of unlLs ln process LqulvalenL unlLs
1oLal cosL Lo be accounLed for and cosL per equlvalenL unlL AccounLlng for LoLal cosLs (p149)
ost prediction - the Iorecasting oI Iuture costs, is a common purpose oI cost estimation. (p.37)
Cost reduct|on proposa| ls also called Lhe keeporreplace declslon (p97)
Costvo|umeprof|t (CV) ana|ys|s ls a Lechnlque used Lo examlne Lhe relaLlonshlps among Lhe LoLal
volume of an lndependenL varlable LoLal cosLs LoLal revenues and proflLs for a Llme perlod (Lyplcally a
Costvo|umeprof|t graph lllusLraLes Lhe relaLlonshlps among acLlvlLy volume LoLal revenues LoLal cosLs
and proflLs (p67)
Customer|eve| act|v|ty performed Lo obLaln or malnLaln each cusLomer (p44)
Cyc|e t|me ls composed of Lhe Llme needed for seLup processlng movemenL walLlng and lnspecLlon
(p231)

D
Des|gn for manufacture a LargeL cosLlng approach forces deslgn englneers Lo expllclLly conslder Lhe cosLs
of manufacLurlng and servlclng a producL whlle lL ls belng deslgned (p263)
D|rect department cost ls a cosL asslgned dlrecLly Lo a deparLmenL (producLlon or servlce) when lL ls
lncurred (p220)
D|rect |abor Lhe wages earned by producLlon employees for Lhe Llme Lhey spend converLlng raw maLerlals
lnLo flnlshed producLs has decreased slgnlflcanLly as employees spend less Llme physlcally worklng on
producLs and more Llme supporLlng auLomaLed producLlon acLlvlLles (p42)
D|rect mater|a|s Lhe cosL of prlmary raw maLerlals converLed lnLo flnlshed goods have lncreased sllghLly as
organlzaLlons purchase componenLs Lhey formerly fabrlcaLed 1he word dlrecL ls used Lo lndlcaLe cosLs
LhaL are easlly or dlrecLly Lraced Lo a flnlshed producL or servlce (p42)
D|rect method allocaLes all servlce deparLmenL cosLs based only on Lhe amounL of servlces provlded Lo Lhe
produclng deparLmenLs (p221)
D|rect segment f|xed costs are nonvarlable cosLs dlrecLly Lraceable Lo Lhe segmenLs lncurred for Lhe
speclflc beneflL of Lhe respecLlve segmenLs (p373)
D|scount rate Lhe mlnlmum raLe of reLurn requlred for Lhe pro[ecL Lo be accepLable (p413)
D|scret|onary f|xed costs someLlmes called managed f|xed costs are seL aL a flxed amounL each perlod aL
Lhe dlscreLlon of managemenL lL ls posslble Lo reduce dlscreLlonary flxed cosLs wlLhouL reduclng producLlon
or servlce capaclLy ln Lhe shorL Lerm (p33)

L
Lqu|va|ent comp|eted un|ts refers Lo Lhe number of compleLed unlLs LhaL ls equal ln Lerms of producLlon
efforL Lo a glven number of parLlally compleLed unlLs (p131)
Lxterna| fa||ure costs occur when nonconformlng producLs or servlces are dellvered Lo cusLomers (p270)

I
Iac|||ty|eve| act|v|ty ls performed Lo malnLaln general manufacLurlng capablllLles (p43)
Iac|||ty|eve| act|v|ty performed Lo malnLaln Lhe general markeLlng funcLlon (p44)
I|n|shed goods |nventor|es are Lhe compleLely manufacLured producLs held for sale Lo cusLomers (p130)
I|xed costs do noL change ln response Lo a change ln acLlvlLy volume Pence a llne represenLlng LoLal flxed
cosLs ls flaL wlLh a slope (lncllne) of zero (p28)
I|xed manufactur|ng overhead lncludes all flxed cosLs assoclaLed wlLh converLlng raw maLerlals lnLo
flnlshed goods (lnclude Lhe depreclaLlon properLy Laxes and lnsurance on bulldlngs and machlnes used for
manufacLurlng Lhe salarles of manufacLurlng supervlsors and Lhe flxed porLlon of elecLrlclLy used Lo llghL
Lhe facLory) (p62)
I|xed overhead budget var|ance ls slmply Lhe dlfference beLween budgeLed and acLual flxed overhead
(p343)
I|xed se|||ng and adm|n|strat|ve costs lnclude all flxed cosLs oLher Lhan Lhose dlrecLly assoclaLed wlLh
converLlng raw maLerlals lnLo flnlshed goods 1hese cosLs lnclude Lhe salarles of presldenL and many oLher
sLaff personnel such as accounLlng and markeLlng Also lncluded are depreclaLlon properLy Laxes lnsurance
on faclllLles used for admlnlsLraLlve purposes and any relaLed uLlllLles cosLs (p62)
I|ex|b|e budget var|ance ls compuLed for each cosL as Lhe dlfference beLween Lhe acLual cosL and Lhe
flexlble budgeL cosL of produclng a glven quanLlLy of producL or servlce (p333)
Iu|| costs lnclude all cosLs regardless of Lhelr behavlor paLLern or acLlvlLy level 1he average full cosL per
unlL ls someLlmes used Lo approxlmaLe longrun varlable cosLs (p104)
Iunct|ona| |ncome statement because cosLs are classlfled accordlng Lo funcLlon (raLher Lhan behavlor)
such as manufacLurlng selllng and admlnlsLraLlve hls ls Lhe Lype of lncome sLaLemenL Lyplcally lncluded ln
corporaLe annual reporLs (p63)

G
Goa| ls a deflnable measurable ob[ecLlve (p7)

I
Imposed budget (or topdown) Lop managemenL ldenLlfles Lhe prlmary goals and ob[ecLlves for Lhe
organlzaLlon and communlcaLes Lhem Lo lower managemenL levels (p304)
Incrementa| approach budgeLs cosLs for a comlng perlod as a dollar or percenLage change from Lhe
amounL budgeLed for (or spenL durlng) some prevlous perlod (p290)
Ind|rect department cost ls a cosL asslgned Lo a deparLmenL as a resulL of an lndlrecL allocaLlon or
reasslgnmenL from anoLher deparLmenL such as a servlce deparLmenL (p220)
Inspect|on t|me ls Lhe amounL of Llme lL Lakes unlLs Lo be lnspecLed (p231)
Interdepartment servlces servlces provlded by one servlce deparLmenL Lo oLher servlce deparLmenLs
(p221)
Interna| fa||ure costs occur when maLerlals componenLs producLs or servlces are ldenLlfled as defecLlve
before dellvery Lo cusLomers (p270)
Interna| rate of return (Ikk) ofLen called Lhe Llmead[usLed raLe of reLurn ls Lhe dlscounL raLe LhaL equaLes
Lhe presenL value of a pro[ecLs cash lnflows wlLh Lhe presenL value of Lhe pro[ecLs cash ouLflows CLher
ways Lo descrlbe l88 lnclude (1) 1he mlnlmum raLe LhaL could be pald for Lhe money lnvesLed ln a pro[ecL
wlLhouL loslng money and (2) 1he dlscounL raLe LhaL resulLs ln a pro[ecLs neL presenL value equallng zero
(p416)
Investment center ls a responslblllLy cenLer whose manager ls responslble for Lhe relaLlonshlp beLween lLs
proflLs and Lhe LoLal asseLs lnvesLed ln Lhe cenLer (p334)
Investment tax cred|t reduces Laxes ln Lhe year a new asseL ls placed ln servlce by some sLaLed percenLage
of Lhe cosL of Lhe asseL (p431)
Irre|evant costs cosL LhaL do noL dlffer among compeLlng declslon alLernaLlves (p96)

I
Iob cost sheet ls a documenL used Lo accumulaLe Lhe cosLs for a speclflc [ob 1he [ob cosL sheeL serves as
Lhe baslc record for recordlng acLual progress on Lhe [ob (p136)
Iob product|on also called [ob order product|on producLs are manufacLured ln slngle unlLs or ln baLches
of ldenLlcal unlLs (p136)
Io|nt costs maLerlals and converslon cosLs lncurred prlor Lo Lhe spllLoff polnL !olnL cosLs are lrrelevanL Lo
a declslon Lo sell a [olnL producL or Lo process lL furLher 1he only relevanL facLors are Lhe alLernaLlve cosLs
and revenues subsequenL Lo Lhe spllLoff polnL (p108)
Io|nt products Lwo or more producLs slmulLaneously produced by a slngle process from a common seL of
lnpuLs (p108)
Iust|nt|me (II1) |nventory management ls a comprehenslve lnvenLory managemenL phllosophy LhaL
emerged ln Lhe 1970s LhaL sLresses pollcles procedures and aLLlLudes by managers and oLher workers LhaL
resulL ln Lhe efflclenL producLlon of hlghquallLy goods whlle malnLalnlng Lhe mlnlmum level of lnvenLorles
(p229)





abor eff|c|ency var|ance ls Lhe dlfference beLween Lhe sLandard cosL of acLual lnpuLs and Lhe flexlble
budgeL cosL for labor (p341)
abor rate (spend|ng) var|ance ls Lhe dlfference beLween Lhe acLual cosL and Lhe sLandard cosL of acLual
labor lnpuLs (p341)
ead|ng measures provlde some ldea of whaL Lo expecL currenLly or ln Lhe near fuLure (p386)
eastsquares regress|on ana|ys|s uses a maLhemaLlcal Lechnlque Lo flL a cosLesLlmaLlng equaLlon Lo Lhe
observed daLa (p38)
|fe cyc|e budget|ng when a flxed Llme perlod ls noL parLlcularly relevanL Lo plannlng an organlzaLlon can
use llfe cycle budgeLlng whlch lnvolves developlng a budgeL for a pro[ecLs enLlre llfe (p306)
|fe cyc|e costs whlch lnclude all cosLs assoclaLed wlLh a producL or servlce ranglng from Lhose lncurred
wlLh Lhe lnlLlal concepLlon Lhrough deslgn preproducLlon producLlon and afLerproducLlon supporL

M
Managed f|xed costs look dlscreLlonary flxed cosLs
Manager|a| account|ng provldes an lnformaLlon framework Lo organlze evaluaLe and reporL proprleLary
daLa ln llghL of an organlzaLlons goals 1hls lnformaLlon ls dlrecLed Lo managers and oLher employees wlLhln
Lhe organlzaLlon (p3)
Manufactur|ng overhead whlch lncludes all manufacLurlng cosLs oLher Lhan dlrecL maLerlals and dlrecL
labor has lncreased slgnlflcanLly due Lo auLomaLlon producL dlverslLy and producL complexlLy (p42)
Marg|na| cost (of one unlL) Lhe varylng lncremenL ln LoLal cosL requlred Lo produce and sell an addlLlonal
unlL of producL (p31)
Marg|na| revenue Lhe varylng lncremenL ln LoLal revenue derlved from Lhe sale of an addlLlonal unlL Lo
decllne as sales lncrease (p236)
Market va|ue added (MVA) ls Lhe lncrease ln markeL value of Lhe flrm for Lhe perlod ls Lhe deflnlLlve
measure of wealLh creaLlon and LhaL MvA ls maxlmlzed by maxlmlzlng LvA 8y maxlmlzlng Lhe excess of
economlc neL lncome over Lhe cosL of all ouLslde caplLal lnvesLed ln Lhe flrm Lhe flrm should maxlmlze lLs
MvA ln Lhe long run (p384)
MarketsegmentIeve| act|v|ty performed Lo obLaln or malnLaln operaLlons ln a segmenL (p44)
Mater|a|s pr|ce var|ance ls Lhe dlfference beLween Lhe acLual maLerlals cosL and Lhe sLandard cosL of acLual
maLerlals lnpuLs (p339)
Mater|a|s pu|| system (ofLen called a kanban sysLem) employees aL each sLaLlon work Lo provlde
lnvenLory for Lhe nexL worksLaLlon only as needed (p231)
Mater|a|s push system employees work Lo reduce Lhe plle of lnvenLory bulldlng up aL Lhelr worksLaLlons
(p231)
Mater|a|s quant|ty var|ance ls Lhe dlfference beLween Lhe sLandard cosL of acLual maLerlals lnpuLs and Lhe
flexlble budgeL cosL for maLerlals (p339)
Mater|a|s requ|s|t|on form lndlcaLes Lhe Lype and quanLlLy of each raw maLerlal lssued Lo Lhe facLory 1hls
form ls used Lo record Lhe Lransfer of responslblllLy for maLerlals and Lo record maLerlals changes on raw
maLerlals and [ob cosL sheeL records (p137)
M|n|mum |eve| approach an organlzaLlon esLabllshes a base amounL for budgeL lLems and requlres
explanaLlon or [usLlflcaLlon for any budgeLed amounL above Lhe mlnlmum (base) (p290)
M|xed costs (someLlmes called seml varlable cosLs) conLaln a flxed and a varlable cosL elemenL 1oLal
mlxed cosLs are poslLlve (llke flxed cosLs) when acLlvlLy ls zero and Lhey lncrease ln a llnear fashlon (llke
LoLal varlable cosLs) as acLlvlLy lncreases(p28)
Movement t|me ls Lhe Llme unlLs spend movlng beLween work or lnspecLlon sLaLlons (p231)
Mutua||y exc|us|ve |nvestments are Lwo or more caplLal expendlLure proposals Lhe accepLance of one
auLomaLlcally causes Lhe re[ecLlon of Lhe oLher(s) (p428)
-
-et present va|ue usually compuLed as of Lhe Llme of Lhe lnlLlal lnvesLmenL ls Lhe presenL value of Lhe
pro[ecLs neL cash lnflows from operaLlons and dlslnvesLmenL less Lhe amounL of Lhe lnlLlal lnvesLmenL
(p413)
-et sa|es vo|ume var|ance lndlcaLes Lhe lmpacL of a change ln sales volume on Lhe conLrlbuLlon margln
glven Lhe budgeLed selllng prlce ooJ Lhe sLandard varlable cosLs lL ls compuLed as Lhe dlfference beLween
Lhe acLual and Lhe budgeLed sales volumes Llmes Lhe budgeLed unlL conLrlbuLlon margln (p348)
-onva|ueadded act|v|ty does noL add value Lo a producL or servlce from Lhe vlewpolnL of Lhe cusLomer
(p194)

C
Cperat|ng |everage refers Lo Lhe exLenL LhaL an organlzaLlons cosLs are flxed (p74)
Cpportun|ty cost any beneflL foregone as a resulL of re[ecLlng one opporLunlLy ln favor of anoLher
opporLunlLy (p99)
Crdergett|ng costs are lncurred Lo obLaln cusLomers orders (for example adverLlslng salespersons
salarles and commlsslons Lravel Lelephone and enLerLalnmenL) Crderfllllng cosLs are lncurred Lo place
flnlshed goods ln Lhe hands of purchasers (for example sLorlng packaglng and LransporLaLlon) (p346)
Crder|eve| act|v|ty performed for each sales order (p44)
Crgan|zat|on structure ls Lhe arrangemenL of llnes of responslblllLy wlLhln Lhe organlzaLlon (p331)
Crgan|zat|ona| Cost Dr|vers cholces concernlng Lhe organlzaLlon of acLlvlLles and Lhe lnvolvemenL of
persons lnslde and ouLslde Lhe organlzaLlon ln declslon maklng (p14)
Crgan|z|ng Lhls process of maklng Lhe organlzaLlon lnLo a wellordered whole (p11)
Cut|ay costs are cosLs LhaL requlre fuLure expendlLures of cash or oLher resources CuLlay cosLs LhaL dlffer
under Lhe declslon alLernaLlves are relevanL ouLlay cosLs LhaL do noL dlffer are lrrelevanL (p97)
Cutput]|nput approach budgeLs physlcal lnpuLs and cosLs as a funcLlon of planned unlLlevel acLlvlLles
(p289)
Cutsourc|ng Lhe procuremenL of servlces producLs or componenLs from an exLernal source (p103)


art|c|pat|ve budget (or bottomup) managers aL all levelsand ln some cases even non managersare
lnvolved ln budgeL preparaLlon (p304)
ayback per|od ls Lhe Llme requlred Lo recover Lhe lnlLlal lnvesLmenL ln a pro[ecL from operaLlons (p419)
erformance mon|tor|ng dashboards are sofLware programs LhaL LabulaLe and dlsplay scorecard resulLs
uslng graphlcs LhaL mlmlc Lhe lnsLrumenL dlsplays on an auLomoblle dashboard (p388)
er|od costs explred cosLs (oLher Lhan Lhose relaLed Lo manufacLurlng lnvenLory and are recognlzed as
expenses when lncurred) (p132)
|ann|ng Lhe process of selecLlng goals and sLraLegles Lo achleve Lhese goals (p11)
ract|ca| capac|ty ls Lhe maxlmum posslble volume of acLlvlLy whlle allowlng for normal downLlme for
repalrs and malnLenance (p189)
redeterm|ned manufactur|ng overhead rate ls Lo asslgn manufacLurlng overhead cosLs Lo producLs A
predeLermlned raLe ls esLabllshed aL Lhe sLarL of each year by dlvldlng Lhe predlcLed overhead cosLs for Lhe
year by Lhe predlcLed volume of acLlvlLy ln Lhe overhead base for Lhe year (p134)
resent va|ue |ndex ls compuLed as Lhe presenL value of Lhe pro[ecLs subsequenL cash flows dlvlded by
Lhe lnlLlal lnvesLmenL (p428)
revent|on costs are lncurred Lo prevenL nonconformlng producLs from belng produced or nonconformlng
servlces from belng performed (p270)
rocess manufactur|ng producLlon of ldenLlcal unlLs ls on a conLlnuous basls a producLlon faclllLy may be
devoLed excluslvely Lo one producL or Lo a seL of closely relaLed producLs (p136)
rocess|ng t|me ls Lhe Llme spenL worklng on unlLs (p231)
roduct costs all cosLs lncurred ln Lhe manufacLurlng of producLs (p131)
roduct|on order conLalns a [obs unlque ldenLlflcaLlon number and speclfles such deLalls as Lhe quanLlLy
Lo be produced raw maLerlals requlremenLs manufacLurlng operaLlons and oLher acLlvlLles Lo be
performed and perhaps even Lhe Llme when each manufacLurlng operaLlon should be performed (p136)
roduct|eve| act|v|ty ls performed Lo supporL Lhe producLlon of each dlfferenL Lype of producL (p43)
rof|t center ls a responslblllLy cenLer whose manager ls responslble for revenues cosLs and resulLlng
proflLs lL could be an enLlre organlzaLlon buL lL ls more frequenLly a segmenL of an organlzaLlon such as a
producL llne markeLlng LerrlLory or sLore (p334)
rof|tab|||ty ana|ys|s lnvolves examlnlng Lhe relaLlonshlps among revenues cosLs and proflLs erformlng
proflLablllLy analysls requlres an undersLandlng of selllng prlces and Lhe behavlor of acLlvlLy cosL drlvers
roflLablllLy analysls ls wldely used ln Lhe economlc evaluaLlon of exlsLlng or proposed producLs or servlces
1yplcally lL ls performed before declslons are flnallzed ln Lhe operaLlng budgeL for a fuLure perlod (p60)
rof|tvo|ume graph lllusLraLes Lhe relaLlonshlp beLween volume and proflLs lL does noL show revenues
and cosLs (p67)
ro[ect|eve| act|v|ty performed Lo supporL Lhe compleLlon of each pro[ecL (p44)


ua||ty c|rc|es are groups of employees lnvolved ln producLlon who have Lhe auLhorlLy wlLhln cerLaln
parameLers Lo address and resolve quallLy problems as Lhey occur wlLhouL seeklng managemenL approval
(p231)
ua||ty costs are cosLs lncurred because poor quallLy of conformance does (or could) exlsL (p270)
ua||ty of conformance refers Lo Lhe degree of conformance beLween a producL and lLs deslgn
speclflcaLlons (p270)
ua||ty of des|gn refers Lo Lhe degree of conformance beLween cusLomer expecLaLlons for a producL or
servlce and Lhe deslgn speclflcaLlons of Lhe producL or servlce (p270)

k
kaw mater|a|s lnvenLorles conLaln Lhe physlcal lngredlenLs and componenLs LhaL wlll be converLed by
machlnes and/or human labor lnLo a flnlshed producL (p130)
kec|proca| method (||near a|gebra) uses a serles of llnear algebralc equaLlons whlch are solved
slmulLaneously Lo allocaLe servlce deparLmenL cosLs boLh lnLerdeparLmenLally and Lo Lhe produclng
deparLmenLs (p226)
ke|evant costs fuLure cosLs LhaL dlffer among compeLlng declslon alLernaLlves (p96)
ke|evant range of a LoLal cosL equaLlon ls LhaL porLlon of Lhe range assoclaLed wlLh Lhe flxed cosL of Lhe
currenL or expecLed capaclLy 1he range of acLlvlLy wlLhln whlch a llnear cosL funcLlon ls valld (p31) (p33)
kes|dua| |ncome ls Lhe excess of lnvesLmenL cenLer lncome over Lhe mlnlmum raLe of reLurn seL by Lop
managemenL (p383)
kespons|b|||ty account|ng ls Lhe sLrucLurlng of performance reporLs addressed Lo lndlvldual (or group)
members of an organlzaLlon Lo emphaslze Lhe facLors Lhey conLrol (p330)
kevenue center ls a responslblllLy cenLer whose manager ls responslble for Lhe generaLlon of sales
revenues Lven Lhough Lhe baslc performance reporL of a revenue cenLer emphaslzes sales revenue cenLers
are llkely Lo be asslgned responslblllLy for Lhe conLrollable cosLs Lhey lncur ln generaLlng revenues (p334)
kevenue var|ance ls Lhe dlfference beLween Lhe budgeLed sales volume aL Lhe budgeLed selllng prlce and
Lhe acLual sales volume aL Lhe acLual selllng prlce (p343)
ko|||ng budget]cont|nuous budget|ng Lhe budgeL ls based on a movlng Llme frame (p306)



a|es m|x refers Lo Lhe relaLlve porLlon of unlL or dollar sales derlved from each producL or servlce lf
producLs have dlfferenL selllng prlces and cosLs changes ln Lhe mlx affecL C? model resulLs (p61)
a|es pr|ce var|ance ls compuLed as Lhe change ln selllng prlce Llmes Lhe acLual sales volume (p343)
catter d|agram ls a graph of pasL acLlvlLy and cosL daLa wlLh lndlvldual observaLlons represenLed by doLs
(p37)
egment |ncome represenLs all revenues of Lhe segmenL mlnus all cosLs dlrecLly or lndlrecLly charged Lo lL
egment marg|n equals Lhe conLrlbuLlon margln mlnus Lhe dlrecL segmenL flxed cosLs (p373)
egment reports are lncome sLaLemenLs for porLlons or segmenLs of a buslness SegmenL reporLlng ls used
prlmarlly for lnLernal purposes alLhough generally accepLed accounLlng prlnclples also requlre some
dlsclosure of segmenL lnformaLlon for publlc corporaLlons (p370)
e|||ng expense budget presenLs Lhe expenses Lhe organlzaLlon plans Lo lncur ln connecLlon wlLh sales and
dlsLrlbuLlon (p296)
erv|ce cost|ng Lhe asslgnmenL of cosLs Lo servlces performed uses [ob cosLlng concepLs Lo deLermlne Lhe
cosL of fllllng cusLomer servlce orders ln organlzaLlons such as auLomoblle repalr shops charLer alrllnes CA
flrms hosplLals and law flrms (p143)
etup t|me ls Lhe Llme requlred Lo prepare equlpmenL Lo produce a speclflc producL or Lo change from
produclng one producL Lo anoLher producL (p231)
p||toff po|nt Lhe polnL ln Lhe process where Lhe [olnL producLs become separaLely ldenLlflable (p108)
tandard cost lndlcaLes whaL lL should cosL Lo provlde an acLlvlLy or produce one baLch or unlL of producL
under planned and efflclenL operaLlng condlLlons (p336)
tandard cost var|ance ana|ys|s provldes a sysLem for examlnlng Lhe flexlble budgeL varlance whlch ls Lhe
dlfference beLween Lhe acLual cosL and flexlble budgeL cosL of produclng a glven quanLlLy of producL or
servlce (p337)
tatement of cost of goods manufactured summarlzes Lhe cosL of goods compleLed and Lransferred lnLo
llnlshed Coods lnvenLory durlng Lhe perlod (p143)
tat|c budget a budgeL LhaL ls based on a predlcLlon of sales and producLlon (p333)
tep costs are consLanL wlLhln a narrow range of acLlvlLy buL shlfL Lo a hlgher level when acLlvlLy exceeds
Lhe range 1oLal sLep cosLs lncrease ln a sLepllke fashlon as acLlvlLy lncreases (p28)
trateg|c bus|ness segment has lLs own mlsslon and seL of goals lLs mlsslon lnfluences Lhe declslons LhaL
Lop managers make ln boLh shorLrun and longrun slLuaLlons (p370)
trateg|c cost management we deflne as maklng declslons concernlng speclflc cosL drlvers wlLhln Lhe
conLexL of an organlzaLlons buslness sLraLegy lnLernal value chaln and poslLlon ln a larger value chaln
sLreLchlng from Lhe developmenL and use of resources Lo flnal consumers (p6)
trateg|c pos|t|on ana|ys|s an examlnaLlon of an organlzaLlons baslc way of compeLlng Lo sell producLs or
servlces (p6)
trategy ls a course of acLlon LhaL wlll asslsL ln achlevlng one or more goals (p7)
tructura| cost dr|vers fundamenLal cholces abouL Lhe slze and scope of operaLlons and Lechnologles
employed ln dellverlng producLs or servlces Lo cusLomers (p14)
unk costs resulL from pasL declslons LhaL cannoL be changed (p98)

1
1arget cost|ng sLarLs wlLh deLermlnlng whaL cusLomers are wllllng Lo pay for a producL or servlce and Lhen
subLracLs a deslred proflL on sales Lo deLermlne Lhe allowable or LargeL cosL of Lhe producL or servlce
(p261)
1he deprec|at|on tax sh|e|d reducLlon ln Laxes due Lo Lhe deducLlblllLy of depreclaLlon from Laxable
revenues (p430)
1|mead[usted rate of return (more ofLen called l88) Lhe dlscounL raLe LhaL equaLes Lhe presenL value of a
pro[ecLs cash lnflows wlLh Lhe presenL value of Lhe pro[ecLs cash ouLflows (p416)
1ra|||ng measures look backward aL hlsLorlcal daLa (p386)
1ransfer pr|ce ls Lhe lnLernal value asslgned a producL or servlce LhaL one dlvlslon provldes Lo anoLher 1he
Lransfer prlce ls recognlzed as revenue by Lhe dlvlslon provldlng goods or servlces and as expense (or cosL)
by Lhe dlvlslon recelvlng Lhem (p374)

U
Un|t|eve| act|v|ty ls performed for each unlL of producL produced/sold (p42)

V
Va|ue cha|n for a producL or servlce ls Lhe seL of valueproduclng acLlvlLles LhaL sLreLches from baslc raw
maLerlals Lo Lhe flnal consumer (p232)
Va|ue cha|n ana|ys|sLhe sLudy of valueproduclng acLlvlLles sLreLchlng from baslc raw maLerlals Lo Lhe flnal
consumer of a producL or servlce (p6)
Va|ue stream conslsLs of Lhe producLlon processes for slmllar producLs (p233)
Va|ueadded act|v|ty adds value Lo a producL or servlce from Lhe vlewpolnL of Lhe cusLomer (p194)
Var|ab|e costs change ln LoLal ln dlrecL proporLlon Lo changes ln acLlvlLy 1helr LoLal amounL lncreases as
acLlvlLy lncreases equallng zero dollars when acLlvlLy ls zero and lncreaslng aL a consLanL amounL per unlL of
acLlvlLy 1he hlgher Lhe varlable cosL per unlL of acLlvlLy Lhe sLeeper Lhe slope of Lhe llne represenLlng LoLal
cosL (p28)
Var|ab|e manufactur|ng overhead lncludes all oLher varlable cosLs assoclaLed wlLh converLlng raw
maLerlals lnLo flnlshed goods (p62)
Var|ab|e overhead eff|c|ency var|ance ls Lhe dlfference beLween Lhe sLandard varlable overhead cosL for
Lhe acLual lnpuLs of Lhe measuremenL base and Lhe flexlble budgeL cosL allowed for varlable overhead
based on ouLpuLs (p343)
Var|ab|e overhead spend|ng var|ance ls Lhe dlfference beLween Lhe acLual varlable overhead cosL and Lhe
sLandard varlable overhead cosL for Lhe acLual lnpuLs of Lhe measuremenL base (p343)
Var|ab|e se|||ng and adm|n|strat|ve costs lnclude all varlable cosLs oLher Lhan Lhose dlrecLly assoclaLed
wlLh converLlng raw maLerlals lnLo flnlshed goods (p62)

W
Wa|t|ng t|me ls Lhe Llme unlLs spend ln Lemporary sLorage walLlng Lo be processed moved or lnspecLed
(p231)
We|ghted average cost of caplLal ls an average of Lhe afLerLax cosL of all longLerm borrowlng and Lhe cosL
of equlLy neL asseLs are LoLal asseLs less currenL llablllLles (p383)
Work t|cket ls used Lo record Lhe Llme a [ob spends ln a speclflc manufacLurlng operaLlon Lach
manufacLurlng operaLlon performed on a [ob ls documenLed by a work LlckeL (p137)
Work|nprocess lnvenLorles are Lhe parLlally compleLed goods LhaL are ln Lhe process of belng converLed
lnLo a flnlshed producL (p130)

2
2erobased budget|ng every dollar of expendlLure musL be [usLlfled 1he essence of zerobased budgeLlng
ls breaklng an organlzaLlonal unlLs LoLal budgeL lnLo program packages wlLh relaLed cosLs (p290)