(See related pages)
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| Activity | A set of tasks that consume resources, thereby incurring overhead costs. (See page(s) 1251) |
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| Activity cost pool | A temporary account that accumulates the costs a company incurs to support an activity. (See page(s) 1252) |
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| Activity-based costing (ABC) | A two-stage allocation system. The two stages are: (1 identify activities involved in the manufacturing (or service) process and form cost pools by combining activities and (2 compute the predetermined overhead cost allocation rate for each cost pool and assign costs. (See page(s) 1251) |
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| Allocation base | The activity or volume measure used to charge the cost from one department to another. (See page(s) 1248) |
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| Controllable costs | Costs that a manager has the authority to determine or at least strongly influence. (See page(s) 1270) |
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| Cost centre | A segment that incurs costs alone, such as the accounting or legal department. (See page(s) 1260) |
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| Cost driver | A variable that causes the cost of an activity to go up or down; a causal factor. (See page(s) 1251) |
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| Cost pool | A bucket in which costs are accumulated. (See page(s) 1248) |
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| Departmental contribution to overhead | The amount by which a department’s revenues exceed its direct expenses. (See page(s) 1269) |
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| Direct expenses | Expenses traced to a specific department because they are incurred for the sole benefit of that department. (See page(s) 1261) |
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| Indirect expenses | Expenses incurred for the joint benefit of more than one department. (See page(s) 1261) |
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| Investment centre | A segment of business whose manager is responsible for profitability and the efficient use of assets. (See page(s) 1260) |
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| Joint cost | Includes individual cost items incurred for the purposes of carrying out joint processes, leading to multiple outcomes. (See page(s) 1256) |
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| Operating department | Carries out activities that directly contribute to the main purpose of an organization. (See page(s) 1248) |
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| Profit centre | A unit of a business that incurs costs and generates revenues. (See page(s) 1260) |
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| Responsibility accounting budget | A plan that specifies the expected costs and expenses under the control of a manager. (See page(s) 1271) |
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| Responsibility accounting performance report | A responsibility accounting report that compares actual costs and expenses for a department with the budgeted amounts. (See page(s) 1271) |
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| Responsibility accounting system | An accounting system that provides information that management can use to evaluate the performance of a department’s manager. (See page(s) 1270) |
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| Service department | Provides support function to one or more operating and other service departments within an organization. (See page(s) 1248) |
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| Two-stage cost allocation method | A method of allocating overhead costs, wherein service department costs are first assigned to operating departments, and the total costs within each operating department are then assigned to desired cost objects. (See page(s) 1248) |