An activity dictionary is a comprehensive listing of all activities included in an organization's activity-based costing (ABC) system. It provides precise definitions to help managers calculate the costs for each activity, thereby aiding in cost management and control.
Administration Cost Variance is the difference between the administration overheads budgeted for in an accounting period and those actually incurred. This variance helps in evaluating and controlling administrative costs in an organization.
Backward vertical integration is a strategic process where a firm takes ownership or increased control of its supply systems, aiming to streamline operations, better control costs, and eliminate intermediaries, thereby enhancing competitiveness in the marketplace.
Budget Cost Allowance refers to the amount of budgeted expenditure that a cost centre or budget centre is allowed to spend in relation to its budget, with consideration to the actual level of activity achieved during the budget period. It distinguishes between fixed and variable costs to adjust expenditure limits.
A cost included in a budget representing the expected expenses to be incurred by a budget center, cost center, cost unit, product, process, or job.
The techniques used in collecting, processing, and presenting financial and quantitative data within an organization to ascertain the cost of cost centres and cost units and the various operations.
A cost centre is an area of an organization for which costs are collected for the purposes of cost ascertainment, planning, decision-making, and control.
Cost control refers to the techniques used by various levels of management within an organization to ensure that costs incurred fall within acceptable levels. It involves the provision of financial information to management by the accountant and the use of various techniques such as budgetary control and standard costing to highlight and analyze any variances.
Cost estimation is the process of predicting the cost of a project, product, or service by assessing the unit costs of direct costs and overheads for the purposes of planning, control, and pricing.
A comprehensive record-keeping system to maintain the transactions associated with a company's cost accounting. It facilitates detailed tracking of costs and aids in financial control and reporting.
A cost objective is the budget limit set for an activity, task, or project, intended to constrain spending within predefined financial boundaries to ensure financial discipline and project feasibility.
A cost sheet is a form used in costing to collect and present all the costs associated with a service, product, process, or cost center, often for management analysis or use in a costing system.
A predetermined level of cost expected to be incurred by a specific cost item in the supply, production, or operation of a service, product, process, or cost centre. Cost standards are often applied to performance standards in order to calculate standard overhead costs.
Direct Labour Efficiency Variance is an essential component in a standard costing system that evaluates the efficiency of labour in completing a given task. It compares the actual labour hours used to the standard hours expected and calculates the variance in cost using the standard direct labour rate.
Expenditure variance measures the difference between actual spending and budgeted spending. This metric can help businesses understand financial discrepancies, control costs, and improve budgeting processes.
In standard costing and budgetary control, a favourable variance is any difference between the actual and budgeted performance of an organization where this creates an addition to the budgeted profit. For example, a favourable variance may occur if the actual sales revenue is greater than that budgeted or if actual costs are less than budgeted costs.
A fixed fee is a set price agreed upon for the completion of a project, representing a predetermined total cost regardless of the incurred expenses. This arrangement can provide budget certainty for clients while imposing some financial risk for contractors.
A Fixed-Price Contract is a type of contract where the price is preset and not affected by the actual costs incurred during production or service execution. It ensures cost certainty for the buyer, transferring risk to the seller.
Flexed Budget Allowance refers to the budgeted expenditure level for each of the variable cost items adjusted to the level of activity actually achieved. This concept is crucial for adjusting budgetary figures based on actual performance.
Full cost pricing is a method of setting the selling prices of a product or service that ensures the price is based on all the costs likely to be incurred in its supply.
Management accounting involves techniques used to collect, process, and present financial and quantitative data within an organization to aid in performance measurement, cost control, planning, pricing, and decision making. The Chartered Institute of Management Accountants (CIMA) is the major professional body for management accountants in the UK.
Materials variances measure the differences between expected and actual costs related to direct materials used in the production process. These variances help in controlling and analyzing cost efficiency and effectiveness in manufacturing.
Non-controllable costs, also known as uncontrollable costs, refer to expenses that cannot be influenced or managed by individual managers or departments within an organization.
In accounting, a normal standard represents an average standard that is used in standard costing. It is set to be applied over a future period during which conditions are expected to remain relatively stable.
A detailed analysis of operational variance within the framework of standard costing, highlighting how it accounts for the difference between adjusted current standards and actual performance.
The Overhead Efficiency Variance measures the difference between the standard overhead cost allocated based on standard hours and the actual overhead cost incurred based on actual hours worked.
Planning variance refers to the difference between what was originally planned and what was actually achieved in a project or financial projection. It often serves as an indicator of the effectiveness of the planning process and helps identify areas for improvement.
A responsibility centre is a designated section within an organization where costs and income are tracked and assigned to a specific manager. This assignment ensures accountability and efficient financial management.
A single-capacity system in accounting refers to an accounting structure in which each activity or cost element is identified as serving only one purpose—either serving as a cost center or a revenue generator. Unlike the dual-capacity system, the single-capacity system does not recognize dual roles for cost centers or activities.
Standard cost refers to the predetermined unit cost of a product or service within a standard costing system. It is used for budgeting, performance evaluation, and cost control by providing a basis for comparison against actual costs.
Under a standard costing system, the standard cost allowance refers to the level of expenditure permitted for variable costs, based on actual levels of activity. It helps in budgeting and controlling costs efficiently.
Standard costing involves assigning a predetermined cost to products or services, which serves as a benchmark for measuring performance and cost control.
A predetermined rate of pay for direct labour operators used for establishing standard direct labour costs in a standard costing system, providing a basis for comparison with actual direct labour rates paid.
In standard costing, the standard cost derived from the standard quantity of materials allowed for the production of a product and the standard direct materials price for the materials specified for that product.
Standard Marginal Costing involves the determination and control of predetermined standards for marginal costs and income that are used for products and operations, with periodic comparisons to actual outcomes to identify and analyze variances.
The total of all the standard cost allowances for the actual level of activity achieved by an organization. It serves as a benchmark guide to manage and control the costs within an organization.
Standard production cost refers to the estimated costs of products and operations, calculated based on predetermined performance and cost levels, providing a benchmark against which actual production costs can be compared.
The unit standard production cost is the cost per unit of production, incorporating all standard overheads, direct labor, and direct materials, used to measure efficiency and control costs in manufacturing.
In a system of standard costing, the total difference arising between the standard variable overhead absorbed for the actual units produced and the actual variable overhead expenditure incurred. See also Overhead Total Variance.
