- conversion costs
- total of labor and overhead for a product; the costs that “convert” the direct material into the finished product
- cost driver
- activity that is the reason for the increase or decrease of another cost; examples include labor hours incurred, labor costs paid, amounts of materials used in production, units produced, machine hours, or any other activity that has a cause-and-effect relationship with incurred costs
- cost of goods manufactured
- manufacturing costs incurred less the ending work in process inventory
- cost of goods sold
- expense account that houses all costs associated with getting a product ready for sale
- direct labor
- labor directly related to the manufacturing of the product or the production of a service
- direct materials
- materials used in the manufacturing process that can be traced directly to the product
- estimated activity base
- total amount of the activity for the year
- expense recognition principle
- (also, matching principle) matches expenses with associated revenues in the period in which the revenues were generated
- indirect labor
- labor not directly involved in the active conversion of materials into finished products or the provision of services
- indirect materials
- materials used in production but not efficiently traceable to a specific unit of production
- job cost sheet
- document created for each job that includes all material, labor, and overhead costs for that job
- job order costing
- information system that traces the individual costs directly to the final product and not to production departments
- loss leader
- product sold at a price that is often less than the cost of producing it in order to entice customers to buy accessories that are necessary for its use
- manufacturing costs
- total of all costs expended in the manufacturing process; generally consists of direct material, direct labor, and manufacturing overhead
- manufacturing overhead
- costs incurred in the production process that are not economically feasible to measure as direct material or direct labor costs; examples include indirect material, indirect labor, utilities, and depreciation
- materials requisition form
- form showing which specific raw materials and costs are transferred from raw materials inventory to work in process inventory
- operating overhead
- overhead account used for service industries
- overapplied overhead
- situation when the overhead applied to the individual jobs is greater than the actual overhead; when overhead is overapplied, the manufacturing overhead has a credit balance
- period costs
- typically related to a particular time period instead of attached to the production of an asset; treated as an expense in the period incurred (examples include many sales and administrative expenses)
- prime costs
- direct material expenses and direct labor costs
- time ticket
- document used to record the particular job worked on by each employee
- underapplied overhead
- situation when the overhead applied to the individual jobs is less than the actual overhead; when overhead is underapplied, the manufacturing overhead has a debit balance