Activity-Based Costing (ABC) is a method of assigning overhead and indirect costs—such as salaries and utilities—to products and services.
An activity cost pool in activity-based costing groups indirect costs according to activities to allocate costs effectively.
Applied overhead refers to the indirect costs allocated to produced goods or services in a firm’s manufacturing process. These include costs such as utilities, rent, and salaries of the administrative staff.
Cause-and-effect allocation is a cost allocation method where the allocation base is a significant determinant of the cost. This method ensures accurate assignment of indirect costs to cost objects.
Cost allocation is the process of assigning indirect costs to specific cost objects in a way that reflects resource consumption. This is crucial for making informed decisions, setting prices, and measuring profitability.
Cost Assignment or Cost Attribution refers to the procedures by which direct or indirect costs are charged to or made the responsibility of particular cost centers, and ultimately charged to the products manufactured or services provided by the organization.
Cost classification is the process of grouping expenditures according to common characteristics, facilitating the proper allocation and management of expenses within an organization.
A cost pool is an accounting term referring to a grouping of individual costs typically by department or service center. These groupings are used to allocate and better manage indirect costs.
Analyzing direct and indirect costs associated with marketing a product or service in a specific area.
Fixed overhead costs are the elements of the indirect costs of an organization's product that, in total, remain unchanged irrespective of changes in the levels of production or sales. Examples include administrative salaries, sales personnel salaries, and factory rent.
Indirect costs, also known as indirect expenses, are expenses that cannot be traced directly to a product or cost unit and are therefore considered overheads.
Wages and related costs of factory employees, such as inspectors and maintenance crews, whose time is not charged to specific finished products; sometimes combined with indirect materials costs, such as supplies, to derive indirect costs.
Indirect materials cost refers to the expenses incurred in providing materials that are not directly traceable to a specific product or job but are necessary for the manufacturing process.
Indirect overhead refers specifically to overhead costs that cannot be directly attributed to the production of a specific product but are necessary for the overall operation of the business.
Manufacturing expenses, often referred to as manufacturing costs, encompass all the financial expenditures required to produce goods. These costs are crucial for businesses as they significantly impact pricing, budgeting, and overall profitability.
Manufacturing Overhead, also known as Production Overhead, includes all the indirect costs incurred in the production process that cannot be directly traced to the product or cost unit. These costs cover a wide range of expenses such as depreciation of machinery, factory rent, maintenance expenses, and utilities.
Non-production overhead costs refer to the indirect costs that are not classified as manufacturing overheads, such as administration, selling, distribution overheads, and sometimes research and development costs.
Oncost refers to the additional costs incurred beyond the direct expenses associated with employing personnel or handling and storing direct materials. These include wages oncost as well as materials and stores oncost.
Overhead costs are indirect expenses that are not directly tied to a specific product or service but are necessary for the overall operations of an organization.
Overhead absorption, also known as overhead allocation, involves distributing indirect costs to different cost units or products. It's a crucial part of cost accounting, ensuring all production costs are appropriately assigned.
An overhead absorption rate (OAR) is a method used in cost accounting to allocate overhead costs to products or services based on a predefined absorption basis.
Overhead costs refer to ongoing business expenses not directly attributed to creating a product or service. These costs help businesses operate and maintain their daily functions.
The overhead distribution summary provides an overview of how indirect costs are allocated across various departments or cost centers within an organization. It is a crucial aspect of cost accounting that helps in accurate product costing and budgeting.
The costs of production when charged to the cost units and expressed as costs of individual products. Product costs may include both direct costs and indirect costs (overhead); many different costing methods, such as absorption costing, activity-based costing, and process costing, are used in computing product costs.
Production overhead, also known as manufacturing overhead, refers to the indirect costs associated with manufacturing a product. These costs are not directly tied to the production process but are necessary expenses for running a manufacturing operation.
In accounting, stores oncost refers to the indirect costs or overheads associated with handling and storing materials used in production. These costs are not directly attributed to the cost of the raw materials themselves but are necessary for the overall production process.
Traditional costing systems are methods used to allocate indirect costs (overheads) to products, but they may not offer accurate product cost information due to their arbitrary allocation methods. These systems have strengths such as simplicity and cost-efficiency, but weaknesses include lack of precision in contemporary multiproduct environments.
Variable overhead costs represent the elements of an organization's indirect expenses for a product that change in total with fluctuations in production or sales levels. Examples include power, commissions earned by sales personnel, and consumable materials.
