Definitions Flashcards
(35 cards)
Centralisation
The “boss” makes all the decisions
Tends to be favoured in situations where info is centralised and control is important
Decentralisation
Decisions are made at the lowest possible level in the organisation
Tends to be favoured in situations where info is spread over s wide areas and control is less important
Direct materials
Raw/any materials that are used in the final product even finsihed goods that become an essential part of product and that can be physically conveniently traced directly to it
E.g. a car radio installed in a car
Direct labour
Also called touch labour as direct labour workers typically touch the product was being made
Can easily be physically and conveniently traced to individual units of product e.g. which is paid to cars assembly workers
Indirect materials
Materials used to support the production process relatively insignificant materials or minor items
Manufacturing overhead
That cannot be traced directly by direct materials and direct labour costs to specific units produced
Only of course associated with a operating the factory are included
Marketing/selling costs
Cost necessary to secure a customer orders and get the finished product/service in the hands of a customer/order-getting /order- filler cost e.g. advertising shopping
Admin costs
All executive organisational and clerical costs. Associated with the general management of an organisation e.g. executive compensation, general accounting
Product cost
All costs included and making a product.
Costs are initially assigned to inventories so this is also known as inventoriable costs.
Product costs are added to units of products as they are incurred.
Not treated as expenses until the units are sold.
Period costs
All costs not included and product costs.
all selling an admin costs.
Expenses and the time period in which they are incurred.
For example advertising, executive salaries, sales commission.
Common cost
Factory managers salary of cost that is common to a number of course objects that cannot be traced individually
Opportunity cost
The potential benefit that is given up when A alternative is selected over another
for example if you don’t attend university you could be earning £15,000 per year and your opportunity cost of attending university for one year is £15,000
Sunk cost
Can’t be changed by any decision.
They aren’t differential Costs and should be ignored when making decisions.
for example: buying a car; whether you drive park trade or sell it because it doesn’t change
Activity cost pool
Buckets in which costs are accumulated that relate to a single activity in the activity based costing system
Activity measure
allocation base in an ABC system
Benchmarking
Can be used to compare costs and activities
IRRelevant cost
IrrRelevant data that can be ignored and needs not be analysed – this is tremendous amount of time and effort from managers. Most bad decisions are due to including a relevant data and benefits data enormously-managers must be able to correctly identify relevant costs and benefits to be successful in decision-making
Make or buy decisions
Decision concerning whether an item should be produced internally/produced from an outside supplier
Split off point
The point in the manufacturing process where its joint products can be recognised as a separate product
Incremental costs
the cost added by producing one additional unit of a product or service.
Budget
I detailed plan for the acquisition and use of financial and other resources over a specific period of time
Planning
Involves developing objectives and preparing various budgets to see these objectives
Control
Involves the steps taken That Attempt to ensure that objectives are attained
The sales budget
Is the starting point and preparing the master budgets details schedule showing expected sales for the coming period is expressed in units and pounds
