Viva Questions

absorption costing (or full costing) A method of product costing in which both variable and
fixed manufacturing overhead are included in the product costs that flow through the
manufacturing accounts (i.e., Work-in-Process Inventory, Finished-Goods Inventory, and Cost of
Goods Sold).

activity cost pool A grouping of overhead costs assigned to various similar activities identified
in an activity-based costing system.

actual costing A product-costing system in which actual direct material, direct-labor, and actual
manufacturing-overhead costs are added to Work-in-Process Inventory.

actual manufacturing overhead. The actual costs incurred during an accounting period for
manufacturing overhead. Includes actual indirect material, indirect labor, and other
manufacturing costs.

actual overhead rate The rate at which overhead costs are actually incurred during an
accounting period. Calculated as follows: actual manufacturing overhead 4 actual cost driver (or
activity base)

applied manufacturing overhead The amount of manufacturing overhead costs added to Work-
in-Process Inventory during an accounting period.

activity-based costing (ABC) system A two-stage procedure used to assign overhead costs to
products or services produced. In the first stage, significant activities are identified, and overhead
costs are assigned to activity cost pools in accordance with the way resources are consumed by
the activities. In the second stage, the overhead costs are allocated from each activity cost
pool to each product line in proportion to the amount of the cost driver consumed by the product
line.

balanced scorecard A model of business performance evaluation that includes several types of
financial and nonfinancial performance measures, typically comprising the following
perspectives: financial, customer, internal business process, and learning and growth.

batch-level activity An activity that must be accomplished for each batch of products rather than
for each unit.

cost behavior. The relationship between cost and activity.

cost center A responsibility center whose manager is accountable for its costs.

cost of capital. The cost of acquiring resources for an organization, either through debt or
through the issuance of stock.
cost of goods manufactured. The total cost of direct material, direct labor, and manufacturing
overhead transferred from Work-in-Process Inventory to Finished-Goods Inventory during an
accounting period.

cost of goods sold. The expense measured by the cost of the finished goods sold during a period
of time.

cost pool. A collection of costs to be assigned to a set of cost objects.

conversion costs Direct-labor cost plus production-overhead cost or, more generally, the costs of
the resources needed to convert purchased inputs into a marketable product or service.

Cost. The sacrifice made, usually measured by the resources given up, to achieve a particular
purpose.

hybrid product-costing system A system that incorporates features from two or more alternative
product-costing systems, such as job-order and process costing.

job-cost record A document that records the costs of direct material, direct labor, and
manufacturing overhead for a particular production job or batch. The job-cost record is a subsidiary
ledger account for the Work-in-Process Inventory account in the general ledger.

job-order costing system A product-costing system in which costs are assigned to batches or job
orders of production. Used by firms that produce relatively small numbers of dissimilar
products.