Administrative costsAll executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling.

BudgetA detailed plan for the future, usually expressed in formal quantitative terms.

Common costA cost that is incurred to support a number of cost objects but that cannot be traced to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot’s wage is caused by any one passenger taking the flight.

ControlThe process of instituting procedures and obtaining feedback to ensure that all parts of the organization are functioning effectively and moving toward overall company goals.

ControllingEnsuring that the plan is actually carried out and is appropriately modified as circumstances change.

Conversion costDirect labor cost plus manufacturing overhead cost.

Cost behaviorThe way in which a cost reacts to changes in the level of activity.

Cost objectAnything for which cost data are desired. Examples of cost objects are products, customers, jobs, and parts of the organization such as departments or divisions.

Cost of goods manufacturedThe manufacturing costs associated with the goods that were finished during the period.

Differential costA difference in cost between any two alternatives. Also see Incremental cost.

Differential revenueA difference in revenue between two alternatives.

Direct costA cost that can be easily and conveniently traced to a specified cost object.

Direct laborLabor costs that can be easily traced to individual units of product. Also called touch labor.

Direct materialsMaterials that become an integral part of a finished product and whose costs can be conveniently traced to it.

Directing and motivatingMobilizing people to carry out plans and run routine operations.

FeedbackAccounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed.

Financial accountingThe phase of accounting concerned with providing information to stockholders, creditors, and others outside the organization.

Finished goodsUnits of product that have been completed but have not yet been sold to customers.

Fixed costA cost that remains constant, in total, regardless of changes in the level of activity within the relevant range. If a fixed cost is expressed on a per unit basis, it varies inversely with the level of activity.

Incremental costAn increase in cost between two alternatives. Also see Differential cost.

Indirect costA cost that cannot be easily and conveniently traced to a specified cost object.

Indirect laborThe labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.

Indirect materialsSmall items of material such as glue and nails that may be an integral part of a finished product but whose costs cannot be easily or conveniently traced to it.

Inventoriable costsSynonym for product costs.

Managerial accountingThe phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making.

Manufacturing overheadAll manufacturing costs except direct materials and direct labor.

Opportunity costA potential benefit that is given up when one alternative is selected over another.

Performance reportA detailed report comparing budgeted data to actual data.

Period costsCosts that are taken directly to the income statement as expenses in the period in which they are incurred or accrued.

PlanningSelecting a course of action and specifying how the action will be implemented.

Planning and control cycleThe flow of management activities through planning, directing and motivating, and controlling, and then back to planning again.

Prime costDirect materials cost plus direct labor cost.

Product costsAll costs that are involved in acquiring or making a product. In the case of manufactured goods, these costs consist of direct materials, direct labor, and manufacturing overhead. Also see Inventoriable costs.

Raw materialsMaterials that are used to make a product.

Relevant rangeThe range of activity within which assumptions about variable and fixed cost behavior are valid.

Schedule of cost of goods manufacturedA schedule showing the direct materials, direct labor, and manufacturing overhead costs incurred during a period and the portion of those costs that are assigned to Work in Process and Finished Goods.

SegmentAny part of an organization that can be evaluated independently of other parts and about which the manager seeks financial data. Examples include a product line, a sales territory, a division, or a department.

Selling costsAll costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer.

Sunk costA cost that has already been incurred and that cannot be changed by any decision made now or in the future.

Variable costA cost that varies, in total, in direct proportion to changes in the level of activity.

Work in processUnits of product that are only partially complete and will require further work before they are ready for sale to a customer.