Cost Terminology
These costs are easy to track directly to a product, like wood for a table.
What are direct costs?
This type of costing assigns costs to activities instead of just spreading them evenly.
What is Activity-Based Costing (ABC)?
This type of costing is used when every job is unique, like making custom furniture.
What is job costing?
Costs that go up when you make more and down when you make less.
What are variable costs?
Marks favourite store
What is Costco?
Costs that stay the same no matter how much you make.
What are fixed costs?
Costs that happen every time you make a single product, like materials.
What are unit-level costs?
The place where unfinished jobs' costs are stored.
What is Work-in-Process (WIP)?
Costs that stay the same no matter how much you produce.
What are fixed costs?
Mark's wife's
Costs that go up or down depending on how much you make.
What are variable costs?
Costs that happen when you produce a whole batch, like setting up machines.
What are batch-level costs?
Costs you can track to a job without guessing, like labor hours.
What are direct costs?
The range where costs behave predictably.
What is the relevant range?
Mark's favorite food to get from his favorite store
What are hot dogs?
The name for combining and organizing costs into groups.
What is cost pooling?
The step in ABC where you assign activity costs to products.
What is cost assignment?
The rate used to spread overhead costs to jobs.
What is the allocation rate?
A simple method for estimating costs by comparing the highest and lowest data points.
What is the high-low method?
Marks destination before Calgary
Dallas, Texas
These costs become part of the product and are shown as an asset until the product is sold.
What are inventoriable costs?
ABC is most helpful when your products use very different amounts of this.
What is overhead?
What happens when overhead costs are estimated too high for jobs?
What is overallocated overhead?
A method that uses math to predict how costs will change with different activities.
What is regression analysis?
What is cycling?