Cost Accounting
MG15903 glo.qxp
10/4/08
07:42
Page 1179
Glossary
A
abnormal spoilage spoilage that should not occur under efficient operating conditions absorption costing all manufacturing costs are assigned to products: direct material, direct labour, variable and fixed manufacturing overhead acceptable quality level (AQL) the defect rate at which total quality costs are minimised account classification method (or account analysis) the process in which managers use their judgement to classify costs as fixed, variable or semivariable costs accounting rate of return (or simple rate of return, rate of return on assets, unadjusted rate of return or return on investment (ROI)) the average annual profit from a project, divided by the initial investment accumulation factor the value of (1 r)n used in present value and future value calculations activity a unit of work performed in the organisation activity-based budgeting (ABB) a process of building up budgets from the major activities of the business activity-based costing (ABC) (system) a methodology that can be used to measure the cost of cost objects and the performance of activities activity-based management (ABM) the process of using information from activity-based costing to analyse activities, cost drivers and performance so that customer value and profitability are improved activity centre a work area in which the activities have a common purpose activity driver a cost driver used to estimate the cost of an activity consumed by the cost object actual costing the process of assigning the actual amounts of direct material, direct labour and overhead to products actual manufacturing overhead the manufacturing overhead costs incurred in production actual overhead rate the actual amount of overhead divided by the actual volume of production adjusted R2 the coefficient of determination after adjusting for the effects of a relatively small number of observations administrative expenses the costs of running a business as a
10/4/08
07:42
Page 1179
Glossary
A
abnormal spoilage spoilage that should not occur under efficient operating conditions absorption costing all manufacturing costs are assigned to products: direct material, direct labour, variable and fixed manufacturing overhead acceptable quality level (AQL) the defect rate at which total quality costs are minimised account classification method (or account analysis) the process in which managers use their judgement to classify costs as fixed, variable or semivariable costs accounting rate of return (or simple rate of return, rate of return on assets, unadjusted rate of return or return on investment (ROI)) the average annual profit from a project, divided by the initial investment accumulation factor the value of (1 r)n used in present value and future value calculations activity a unit of work performed in the organisation activity-based budgeting (ABB) a process of building up budgets from the major activities of the business activity-based costing (ABC) (system) a methodology that can be used to measure the cost of cost objects and the performance of activities activity-based management (ABM) the process of using information from activity-based costing to analyse activities, cost drivers and performance so that customer value and profitability are improved activity centre a work area in which the activities have a common purpose activity driver a cost driver used to estimate the cost of an activity consumed by the cost object actual costing the process of assigning the actual amounts of direct material, direct labour and overhead to products actual manufacturing overhead the manufacturing overhead costs incurred in production actual overhead rate the actual amount of overhead divided by the actual volume of production adjusted R2 the coefficient of determination after adjusting for the effects of a relatively small number of observations administrative expenses the costs of running a business as a