Managerial accounting All Important Definitions

Managerial accounting All Important Definitions

Managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information for the pursuit of an organization's goals. This is also known as "cost accounting."

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Factory overhead, also called manufacturing overhead or factory burden, is the total cost involved in operating all production facilities of a manufacturing business.

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In economics, fixed costs, indirect costs or overheads are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs.

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variable cost

a cost that varies with the level of output.

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A semi-variable cost is a cost composed of a mixture of fixed and variablecomponents. Costs are fixed for a set level of production or consumption, becomingvariable after the level is exceeded. Also known as a "semi-fixed cost."

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In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives..

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A step cost is a cost that does not change steadily with changes in activity volume, but rather at discrete points. The concept is used when making investment decisions and deciding whether to accept additional customer orders. A step cost is a fixedcost within certain boundaries, outside of which it will change

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In economics and business decision-making, a sunk cost is a costthat has already been incurred and cannot be recovered. Sunk costs (also known as retrospective costs) are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken.

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An economic variable is any measurement that helps to determine how aneconomy functions. Examples include population, poverty rate, inflation, and available resources. See also: Indicator.

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Businesses depreciate long-term assets for both tax and accounting purposes. The former affects the balance sheet of a business or entity, and the latter affects the net income that they report. Generally thecost is allocated, as depreciation expense, among the periods in which the asset is expected to be used.

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cost sheet

A document that reflects the cost of the items and services required by a particular project or department for the performance of its business purposes. For example, a departmental cost sheet might include the material costs, labor costs and overhead costs incurred over a given time frame by a department and it therefore provides a record of costs that are chargeable to that departmen
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The materiality concept is the principle in accounting that trivial matters are to be disregarded, and all important matters are to be disclosed. Items that are large enough to matter arematerial items. Materiality refers especially to: • The level of detail appropriate for different financial reports.

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Direct materials are those materials and supplies that are consumed during the manufacture of a product, and which are directly identified with that product. Items designated as direct materials are usually listed in the bill of materials file for a product.

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In accounting, indirect material is a category of indirect cost. Indirect materialsare materials that are used in a production process, but are not directly traceable to a cost object. Indirect material costs are considered overhead costs and treated accordingly

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Allocations of manufacturing indirect costs are required under the majoraccounting frameworks, such as GAAP and IFRS, but are not used as part of the direct costing methodology. Administrative indirect costs are charged to expenseas incurred, and so are considered period costs.

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Direct costs refer to materials, labor and expensesrelated to the production of a product. Other costs, such as depreciation or administrative expenses, are more difficult to assign to a specific product, and therefore are considered indirect costs

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Direct labor refers to the employees and temporary help who work directly on a manufacturer's products. (People working in the production area, but not directly on the products, are referred to as indirect labor.)

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Definition: Indirect labor is the cost of any labor that supports the production process, but which is not directly involved in the active conversion of materials into finished products. Examples of indirect labor positions are: Production supervisor

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Product cost refers to the costs used to create a product. These costs include direct labor, direct materials, consumable production supplies, and factory overhead.Product cost can also be considered the cost of the labor required to deliver a service to a customer.

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Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period. This includes raw materials, work-in-process, and finished goods inventory. The amount of closing stock can be ascertained with a physical count of the inventory

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Opening stock + Purchases - Closing stock = Cost of goods sold. The opening stock for the next accounting period is the same as the closing stock from the immediately preceding period. There are a variety of methods available for calculating the recorded value of closing stock, including: First in, first out method

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Marginal costing is the accounting system in whichvariable costs are charged to cost units and fixedcosts of the period are written off in full against the aggregate contribution. Note that variable costs are those which change as output changes - these are treated under marginal costing as costs of the product

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Direct expense is an expense incurred that varies directly with changes in the volume of a cost object. A cost object is any item for which you are measuringexpenses, such as products, product lines, services, sales regions, employees, and customers.

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Indirect expenses are those expenses that are incurred to operate a business as a whole or a segment of a business, and so cannot be directly associated with a costobject, such as a product, service, or customer. A cost object is any item for which you are separately measuring costs

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