Glossary of Key Terms
- Abnormal Cost Search with Google
- Cost not normally incurred at a given output level under normal conditions, excluded from production cost and charged to Profit and Loss.
- Abnormal Idle Time Search with Google
- Unproductive time that could have been avoided with proper precautions (e.g., due to machine breakdown, power failure, or lack of materials), with wages debited to Costing Profit and Loss.
- Absorption Costing Search with Google
- A costing practice that charges all costs, both variable and fixed, to operations, processes, or products.
- Added Value Search with Google
- The change in market value of a product/service from alteration in form, location, or availability, excluding bought-out materials/services, and including profit.
- Administration Overheads Search with Google
- Indirect expenditures incurred in policy formulation, directing, controlling, and managing an undertaking, not directly related to production or selling.
- Budgeted Costs Search with Google
- Financial and/or quantitative statements prepared in advance, representing management's planned targets for operations, sales, research, and development.
- Centralized Purchasing Search with Google
- A system where all purchasing functions for an organization are routed through one dedicated department.
- Chargeable Expenses Search with Google
- See Direct Expenses.
- Codification of Overheads Search with Google
- A technique for intelligently describing numerous cost accounting heads using numbers, letters, or both, to simplify recording and controlling cost data.
- Commercial Cost Search with Google
- Total costs incurred in operating a business other than manufacturing and production, encompassing administration, selling, and distribution.
- Controllable Costs Search with Google
- Costs that can be influenced by the actions of a specified member or level of management within an undertaking.
- Conversion Cost Search with Google
- The sum of direct wages, direct expenses, and manufacturing overheads, representing the cost of converting raw materials into a finished product.
- Cost Accountancy Search with Google
- The application of costing and cost accounting principles, methods, and techniques for cost control, ascertainment of profitability, and managerial decision-making.
- Cost Accounting Search with Google
- The process of classifying, recording, and allocating expenditure to determine product or service costs, and presenting data for management control and guidance.
- Cost Centre Search with Google
- A location, person, or item of equipment (or a group of these) for which costs are ascertained and used for cost control.
- Cost Driver Search with Google
- Any factor that influences costs; a change in the cost driver leads to a change in the total cost of a related cost object (e.g., number of units produced).
- Cost of Production Search with Google
- Works Cost plus Administration Overheads.
- Cost of Sales Search with Google
- Cost of Production plus Selling and Distribution Overheads.
- Cost Sheet Search with Google
- A statement designed to show the output of a particular accounting period along with a detailed break-up of costs.
- Costing Search with Google
- A technique and process of ascertaining costs, involving principles and rules for determining the cost of products/services.
- Daily Time Sheets Search with Google
- Documents used to record the particulars of time spent by a worker on various jobs or operations each day.
- Decentralized Stores Search with Google
- A system where independent stores are situated in various departments, with each department's storekeeper handling their own stock.
- Differential Cost Search with Google
- The change in costs resulting from a change in the level of activity, pattern, or method of production.
- Direct Costing Search with Google
- A practice of charging all direct costs, variable, and some fixed costs to operations, processes, or products, with other costs written off against profits.
- Direct Expenses Search with Google
- Expenses (other than direct materials and direct labour) incurred specifically for a particular product, job, or department, and directly charged to it.
- Direct Labour Search with Google
- Labour directly engaged in the production of goods or services, whose cost can be conveniently allocated to a specific job, process, or product unit.
- Direct Materials Search with Google
- Materials that form a major part of the finished product and whose cost can be conveniently identified with the product (e.g., bricks in brick-making).
- Discretionary Costs Search with Google
- Fixed costs arising from periodic management decisions, not directly related to operations, and can be eliminated or reduced at management's discretion.
- Distribution Overheads Search with Google
- Expenditure incurred in the process from making the packed product available for dispatch until it reaches its destination (e.g., warehouse rent, delivery van expenses).
- Double Bin System Search with Google
- A stores control method where each bin for material is divided into two parts: a smaller part for minimum quantity and a larger part for remaining quantity, signaling when the minimum stock is reached.
- Elements of Cost Search with Google
- The fundamental divisions of cost: materials, labour, and other expenses, each categorized as direct or indirect.
- Employee Placement Requisition Search with Google
- A form sent to the personnel department whenever a worker is needed by a department, initiating the recruitment process.
- Engineering Department Search with Google
- The department responsible for maintaining control over working conditions and production methods, preparing plans for jobs, making job analyses, and conducting research.
- Expired Cost Search with Google
- Cost related to the current accounting period, treated as an expense or loss.
- Factory Cost Search with Google
- See Works Cost.
- Financial Accounting Search with Google
- A branch of accounting primarily focused on preparing financial statements for external users, providing information on overall profit/loss and financial position.
- Fixed Overhead Search with Google
- Cost that remains constant in total amount within certain limits, irrespective of fluctuations in the level of activity or volume of output.
- Flux Method (Labour Turnover) Search with Google
- A method calculating labour turnover as (Number of additions + Separations) divided by (Average number of employees during a period), multiplied by 100.
- Functional Classification (Overhead) Search with Google
- Classification of overhead costs based on the main functional divisions of a concern, such as manufacturing, administration, selling, and distribution.
- Gant's Task and Bonus Plan Search with Google
- A premium plan where workers are guaranteed time wages; if they achieve standard output, they receive a bonus (e.g., 20% of wages for standard time), and higher efficiency earns piece wages plus the bonus.
- Goods Received Note (GRN) Search with Google
- A document prepared by the goods receiving clerk detailing materials received, used to verify purchases and acknowledge receipt.
- Group Bonus Schemes Search with Google
- Incentive schemes where a bonus is paid to a group of workers, usually divided based on basic wages, for collective output, especially when individual output is hard to measure.
- Halsey Premium Plan Search with Google
- A premium plan where a worker is paid for time taken plus a bonus (usually 50%) on the wages for the time saved from a predetermined standard time.
- Historical Costing Search with Google
- Ascertainment of costs after they have been incurred, focusing on past work.
- Idle Capacity/Facility Cost Search with Google
- The cost associated with the abnormal idleness of fixed assets, available services, or unused production potentiality.
- Imputed Costs Search with Google
- Notional costs that do not involve any cash outlay but are considered for managerial decisions (e.g., notional rent on owned premises, interest on own capital).
- Incentive Bonus Plans Search with Google
- Wage payment schemes designed to motivate workers to increase productivity by offering additional remuneration beyond basic wages for achieving or exceeding set standards.
- Incremental Cost Search with Google
- The increase in cost due to a change in the level of activity, pattern, or method of production.
- Indirect Expenses Search with Google
- Expenses that cannot be directly allocated but can be apportioned to cost centers or units (e.g., rent, rates, insurance).
- Indirect Labour Search with Google
- Labour not directly engaged in production but indirectly assisting direct labour (e.g., supervisors, maintenance workers).
- Indirect Materials Search with Google
- Materials that do not normally form a part of the finished product and cannot be directly allocated (e.g., lubricants, cotton waste).
- Job Analysis Search with Google
- The process of determining and reporting pertinent information relating to the nature of a specific job, including tasks, skills, knowledge, abilities, and responsibilities.
- Job Card Search with Google
- A document used to record the time spent by a worker on each specific job, enabling ascertainment of labour cost per job and comparison with standard time.
- Job Costing Search with Google
- A costing method where costs are collected and accumulated for each specific job, work order, or batch.
- Job Evaluation Search with Google
- A systematic technique used to determine the relative worth of various jobs within an organization for establishing an adequate wage structure.
- Labour Cost Search with Google
- Second major element of cost, representing expenditure incurred on workers by the employer.
- Labour Turnover Search with Google
- Percentage change in the labour force of an organization due to new workers engaged and workers who have left.
- Loss Search with Google
- Diminution in ownership equity for which no compensating value has been received (e.g., destruction of property by fire).
- Managed Costs Search with Google
- See Discretionary Costs.
- Management Accounting Search with Google
- The presentation of accounting information to assist management in policy creation, planning, control, and day-to-day operations.
- Manufacturing Cost Search with Google
- The total of costs involved in the construction and fabrication of units of production.
- Manufacturing Overheads Search with Google
- See Production Overheads.
- Marginal Costing Search with Google
- Ascertainment of marginal cost by differentiating between fixed and variable costs, used to determine the effect of volume changes on profit.
- Materials Search with Google
- First major element of cost, categorized into direct and indirect.
- Merrick's Multiple Piece Rate System Search with Google
- A differential piece rate system applying three piece rates based on performance levels, less harsh than Taylor's.
- Mnemonic Method (Codification) Search with Google
- A codification method where alphabets or symbols are used to assist memory in identifying expenses or cost centers.
- Motion Study Search with Google
- A detailed study of the necessary movements involved in performing an operation to determine the most efficient way.
- Multiple Costing Search with Google
- A combination of costing methods (e.g., job costing for components, batch costing for final product).
- Normal Cost Search with Google
- Cost normally incurred at a given output level under normal conditions, part of production cost.
- Normal Idle Time Search with Google
- Unavoidable unproductive time for which employer pays but obtains no production (e.g., tea breaks, time between jobs).
- Notional Costs Search with Google
- See Imputed Costs.
- Operation Costing Search with Google
- Costing method applicable where standardized goods or services result from repetitive, continuous operations or processes, with costs averaged over units produced.
- Opportunity Cost Search with Google
- The maximum possible alternative earning that might have been earned if productive capacity or services had been put to some other advantageous use.
- Out of Pocket Costs Search with Google
- Costs that involve actual cash expenditure or payment to outsiders, relevant for short-term decisions.
- Output Costing Search with Google
- A costing method suitable for industries producing a single, standardized product (e.g., bricks, coal).
- Outworkers Search with Google
- Workers who perform certain portions of work at their own premises using their own tools, usually paid on a piece basis.
- Overhead Costs Search with Google
- See Overhead.
- Overheads Search with Google
- Aggregate of indirect material cost, indirect labour, and other indirect expenses that cannot be conveniently or economically charged directly to specific cost units.
- Pay-roll Department Search with Google
- The department responsible for maintaining wage records, calculating wages, preparing pay-rolls, and distributing wages/salaries.
- Period Costs Search with Google
- Costs incurred based on time (e.g., rent, salaries), relating to administration and selling, not inventoried, and expensed in the period incurred.
- Personnel Department Search with Google
- The department responsible for recruitment, discharge, classification, and wages policies of employees.
- Piece Rate System Search with Google
- A wage payment system where a fixed rate is paid for each unit produced, job completed, or operation performed, regardless of time taken.
- Postponable Costs Search with Google
- Costs that can be delayed or shifted to a future period without immediately affecting current operational efficiency.
- Predetermined Costs Search with Google
- Estimated costs computed in advance of production, taking into account past costs and affecting factors, often serving as standard costs.
- Premium Plans Search with Google
- Wage payment incentive schemes that reward workers with a bonus for completing a task in less than the standard time.
- Preventive Costs (Labour Turnover) Search with Google
- Costs incurred to prevent excessive labour turnover by keeping workers satisfied (e.g., good working conditions, welfare facilities).
- Prime Cost Search with Google
- The sum of Direct Materials, Direct Labour, and Direct Expenses.
- Process Costing Search with Google
- A costing method suitable for industries with continuous production through distinct processes, where costs are ascertained for each process.
- Product Costs Search with Google
- Costs traceable to the product (direct materials, direct labour, manufacturing overheads) and included in inventory valuation.
- Production Overheads Search with Google
- Indirect expenses of operating the manufacturing divisions, covering indirect expenditure from order receipt to completion (also called Works Overheads or Manufacturing Overheads).
- Programmed Costs Search with Google
- See Discretionary Costs.
- Purchase Order Search with Google
- A written authorization to a supplier to supply specific materials, serving as evidence of a contract.
- Purchase Requisition Search with Google
- A formal request to the purchasing department to purchase materials, initiated by the storekeeper or departmental head.
- Rate or Time and Motion Study Department Search with Google
- The department responsible for time and motion studies, setting piece rates, and conducting job analysis and evaluation.
- Replacement Costs (Labour Turnover) Search with Google
- Costs associated with replacing workers who have left, including recruitment, training, and losses due to new workers' inefficiency.
- Replacement Cost Search with Google
- The cost at which an asset or material identical to one being replaced or revalued could be purchased at current market price.
- Research and Development Overheads Search with Google
- Indirect expenditures for searching for new products/methods (research) and implementing decisions to produce new/improved methods until formal production begins (development).
- Rowan Premium Plan Search with Google
- A premium plan where the bonus is a proportion of the time taken's wages, determined by the ratio of time saved to standard time.
- Selling Overheads Search with Google
- Costs incurred in creating and stimulating demand and securing orders (e.g., advertising, salesmen's salaries, commissions).
- Semi-variable Costs Search with Google
- Costs that are partly fixed and partly variable, containing elements that vary with activity and elements that remain constant.
- Separation Method (Labour Turnover) Search with Google
- A method calculating labour turnover as (Number of employees left during a period) divided by (Average number of employees during a period), multiplied by 100.
- Service Costing Search with Google
- Costing method suitable for industries rendering services (e.g., transport, hospitals), used to ascertain the cost of services rendered.
- Simplification Search with Google
- Reducing the number of items carried in a store to lower carrying costs and investment in materials.
- Specific Order Costing Search with Google
- Basic costing method applicable where work consists of separate jobs, batches, or contracts authorized by specific orders.
- Standard Costing Search with Google
- A technique involving comparing actual costs with pre-arranged standard costs and analyzing deviations (variances) to identify reasons and take corrective action.
- Standardization Search with Google
- Allotting clear specifications to each item stored, ensuring uniform quality and increasing supplier options.
- Standing Order Numbers Search with Google
- Codes conventionally applied to factory overhead headings to group similar expenses for detailed analysis.
- Step Costs Search with Google
- Costs that remain constant for a given range of output but increase by a fixed amount at higher levels of output (e.g., supervision, canteen staff).
- Stores Department Search with Google
- A dedicated department responsible for exercising control over materials in storage, including receipt, issue, and protection of stock.
- Stores Ledger Search with Google
- A ledger kept in the costing department recording receipts, issues, and balances of materials in both quantity and money values.
- Stores Superintendent Search with Google
- See Storekeeper.
- Storekeeper Search with Google
- The person in charge of the stores department, responsible for stores control, receiving, issuing, and maintaining materials.
- Straight Piece Rate System Search with Google
- The simplest method of payment by result, where payment is made according to a fixed piece rate per unit produced.
- Sunk Cost Search with Google
- An irrecoverable historical cost incurred in the past, irrelevant for future decision-making (e.g., written-down value of abandoned plant).
- Taylor's Differential Piece Rate System Search with Google
- A differential piece rate system that penalizes slow workers with a low piece rate and rewards efficient workers with a high piece rate.
- Time Booking Search with Google
- The recording of time spent by a worker on different jobs or work orders, used to ascertain individual job labour costs.
- Time Card Search with Google
- A document used to record a worker's 'in' and 'out' times at the factory, primarily for attendance and payroll purposes.
- Time-keeping Department Search with Google
- The department concerned with recording the attendance time of each worker in the factory.
- Time Study Search with Google
- A systematic measurement of the time required to perform a task, involving observing average workers, and allowing for fatigue and personal needs to establish a standard time.
- Time Wage System Search with Google
- A wage payment system where workers are paid based on the time they spend working (e.g., hourly, daily, weekly), irrespective of the quantity of output.
- Total Cost Search with Google
- See Cost of Sales.
- Towne Plan Search with Google
- A group incentive plan that encourages cost reduction by foremen and workers, where 50% of the saving in labour cost (actual vs. standard) is distributed among them.
- Training Cost Search with Google
- The cost of educating workers, apprentices, and staff, typically including wages, fees, and material costs during training.
- Uncontrollable Costs Search with Google
- Costs that cannot be influenced by the actions of a specified member or level of management within an undertaking.
- Uniform Costing Search with Google
- The use of the same costing principles and/or practices by several undertakings for common control or comparison of costs.
- Urgent Costs Search with Google
- Costs that must be incurred immediately to avoid hampering production, whose deferment would negatively impact current operations.
- Variable Overhead Search with Google
- Overhead cost that varies in total direct proportion to changes in the volume of output or productive activity.
- Wage System Search with Google
- A method or plan for determining and paying wages to workers, aiming to provide fair remuneration while controlling labour costs.
- Wages Abstract Search with Google
- A summary prepared by the cost accounting department detailing direct labour costs, indirect labour costs, and departmental labour costs from time tickets, also known as Wages Analysis Sheet.
- Weekly Time Sheets Search with Google
- Documents similar to daily time sheets but recording time particulars for a full week.
- Works Cost Search with Google
- Prime Cost plus Works or Factory Overheads (also called Factory Cost or Manufacturing Cost).
- Works Overheads Search with Google
- See Production Overheads.