| Budget | Formal statement of future plans, usually expressed in monetary terms.
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| Continuous improvement | Concept requiring every manager and employee to continually look to improve operations.
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| Control | Process of monitoring planning decisions and evaluating the organization's activities and employees.
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| Controllable cost | Costs that a manager has the power to control or at least strongly influence.
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| Conversion costs | Expenditures incurred in converting raw materials to finished goods; includes direct labor costs and overhead costs.
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| Cost object | Product, process, department, or customer to which costs are assigned.
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| Customer orientation | Company position that its managers and employees be in tune with the changing wants and needs of consumers.
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| Cycle efficiency (CE) | A measure of production efficiency, which is defined as value-added (process) time divided by total cycle time.
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| Cycle time (CT) | A measure of the time to produce a product or service, which is the sum of process time, inspection time, move time, and wait time; also called throughput time.
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| Direct costs | Costs incurred for the benefit of one specific cost object.
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| Direct labor | Efforts of employees who physically convert materials to finished product.
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| Direct labor costs | Wages and salaries for direct labor that are separately and readily traced through the production process to finished goods.
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| Direct material | Raw material that physically becomes part of the product and is clearly identified with specific products or batches of product.
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| Direct material costs | Expenditures for direct material that are separately and readily traced through the production process to finished goods.
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| Factory overhead | Factory activities supporting the production process that are not direct material or direct labor; also called overhead and manufacturing overhead.
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| Factory overhead costs | Expenditures for factory overhead that cannot be separately or readily traced to finished goods; also called overhead costs.
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| Finished goods inventory | Account that controls the finished goods files, which acts as a subsidiary ledger (of the Inventory account) in which the costs of finished goods that are ready for sale are recorded.
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| Fixed cost | Cost that does not change with changes in the volume of activity.
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| Goods in process inventory | Account in which costs are accumulated for products that are in the process of being produced but are not yet complete; also called work in process inventory.
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| Indirect costs | Costs incurred for the benefit of more than one cost object.
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| Indirect labor | Efforts of production employees who do not work specifically on converting direct materials into finished products and who are not clearly identified with specific units or batches of product.
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| Indirect labor costs | Labor costs that cannot be physically traced to production of a product or service; included as part of overhead.
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| Indirect material | Material used to support the production process but not clearly identified with products or batches of product.
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| Just-in-time (JIT) manufacturing | Process of acquiring or producing inventory only when needed.
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| Lean business model | Practice of eliminating waste while meeting customer needs and yielding positive company returns.
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| Managerial accounting | Area of accounting mainly aimed at serving the decision-making needs of internal users; also called management accounting.
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| Manufacturing statement | Report that summarizes the types and amounts of costs incurred in a company's production process for a period; also called cost of goods manufacturing statement.
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| Mixed costs | Cost that behaves like a combination of fixed and variable costs.
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| Non-value-added time | The portion of cycle time that is not directed at producing a product or service; equals the sum of inspection time, move time, and wait time.
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| Opportunity cost | Potential benefit lost by choosing a specific action from two or more alternatives.
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| Out-of-pocket cost | Cost incurred or avoided as a result of management's decisions.
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| Period costs | Expenditures identified more with a time period than with finished products costs; includes selling and general administrative expenses.
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| Planning | Process of setting goals and preparing to achieve them.
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| Prime costs | Expenditures directly identified with the production of finished goods; include direct materials costs and direct labor costs.
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| Product costs | Costs that are capitalized as inventory because they produce benefits expected to have future value; include direct materials, direct labor, and overhead.
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| Raw materials inventory | Goods a company acquires to use in making products.
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| Sunk cost | Cost already incurred and cannot be avoided or changed.
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| Total quality management (TQM) | Concept calling for all managers and employees at all stages of operations to strive toward higher standards and reduce number of defects.
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| Value-added time | The portion of cycle time that is directed at producing a product or service; equals process time.
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| Value chain | Sequential activities that add value to an entity's products or services; includes design, production, marketing, distribution, and service.
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| Variable cost | Cost that changes in proportion to changes in the activity output volume.
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