Activity-based costing (ABC)
A method of allocating overhead based on each product's use of activities in making the product
Conversion costs
Direct labor and manufacturing overhead costs incurred in converting raw materials into finished goods
Costs of Goods Manufactured
Total cost of work in process less the cost of the ending work in process inventory
Direct Labor
The work of factory employees that can be physically and directly associated with converting raw materials into finished goods
Direct Materials
Raw materials that can be physically and directly associated with manufacturing the finished product
Enterprise Resource Planning System (ERP)
Software that provides a comprehensive, centrallized, integrated, source of information used to manage all major business processes
Indirect Labor
Work of factory employees that has no physical association with the finished product, or for which it is impactical to trace the costs to the goods produced
Indirect materials
raw materials that do not physically become part of the finished product or cannot be traced because their physical association with the finished product is too small
Just-in-time Inventory
inventory system in which goods are manufactured or purchased just in time for use
Managerial Accounting
a field of accounting that provides economic and financial information for managers and other internal users
Manufacturing Overhead
Manufacturing costs that are indirectly associated with the manufacture of the finished product
Period Costs
Costs that are identified with a specific time period and charged to expense as incurred
Prime Costs
Direct materials and direct labor
Product Costs
Costs that are a necessary and integral part of producing the finished product
Supply Chain
All activities from receipt of an order to delivery of a product or service
Total Cost of Work in Process
Cost of the beginning work in process plus total manufacturing overhead incurred in the current period
Total Manufacturing Costs
The sum of direct materials, direct labor, and manufacturing overhead incurred in the current period
Total Quality Management (TQM)
Systems implemented to reduce defects in finished products with the goal of achieving zero defects
Value Chain
All activities associated with providing a product or service