Dictionary :
A
Abs orbed Ove rhead: Ov erheads which, b y mean s of absorption rates, in i ncluded in costs of specifi c products or saleable se rvices, in a g iven period of time .
Abs orption Cost: Th e p roce du re whi ch ch arge s f ixe d a s wi ll a s varia ble ov erh e ad at a p redetermined level of a ctivity.
Abs orption Rate: A rate charg ed to a co st unit inte nde d to acco unt f or the ove rhea d at a p redetermined level of a ctivity.
Acti vi ty-ba sed Costing (ABC): Cost attribution to cost uni ts on the basis of benefit re ceived f ro m i ndi re ct activities, e.g ., ord ering, setti ng-u p-, assu ring qu ality.
Adminis tra tion Cost: Co st of manage me nt, an d of secretarial, a ccoun ting and admin istrativ e service s, which cannot b e dire ctl y rela ted to th e production, marketin g, research or d evelop me nt f unction s of the ente rprise.
Attainable S ta nda rd : A standard wh ich can be a ttain ed if a standa rd un it of work is carrie d o ut eff icientl y, a machi ne p rope rly o pera ted o r a materi el p rope rly u sed . Allo wances are mad e fo r normal losse s, wa ste and ma chine down time.
Th e sta nda rd rep re se nts f uture p erf orman ce a nd objectiv es wh ich are rea son abl y attainable . Be sid es havin g a de si rable motivationa l i mp act on emplo ye es, attainable standards serve o ther pu rposes, e .g., cash bud geting, inventory valua tion a nd budge ting dep artmental p erf ormance.
B
Bas ic Standa rd: A standa rd e sta bli she d for use over a long p eriod f ro m which a curre nt standard can be develope d.
Bas es of Apportionment: Formul ae v arying a ccording to the n ature of co sts for th e purp ose of apportio ning those co sts among cost centres or p rodu cts.
Bas ic Costing Me thod: A me thod of costing which is devise d to suit th e me thod s by which g ood s are manuf actured or servi ce s a re provid ed.
Batc h Cost: Ag greg ated costs rela tiv e to a cost u nit which con si sts of a gro up of similar a rticl es which maintain s i ts identity throu ghout o ne or more stag es of pro ductio n
Batc h Costing: Th at f orm of spe cific ord er co sting which applie s whe re simila r a rticles a re manufactured in ba tches, eith er for sale o r f or use within the unde rtaking. I n mo st case s the costing is simila r to job costin g.
Brea king-down Time : The time required to ret urn a wo rk station to a st and ard cond itio n af t er comple tion of a n operation .
Brea k-even Chart: A chart which indicates a ppro ximat e p rofit or lo ss a t d ifferent levels of sale s v olu me withi n a limited rang e.
Brea k-even Point : Th e lev el of activity at whi ch the re is neithe r profit or loss. It can b e a scertai ned by using a break -even chart or by ca lculation .
Budget : A p lan e xp ressed in mo ney. It is p repa red and ap proved p rior to be bud get period a nd may sh ow in co me, expen ditu re an d th e capi tal to be emplo yed .
Budget Cost Allowance: The cost whi ch a budget cen tre is e xpe cted to incur in a contro l p eriod .
At its simplest this usually comp rise s va riab le costs in dire ct proporti on to the volume of p roductio n o r serv ice achi eve d, a nd fixed costs a s a prop ortio n of the ann ual bud get .
Budget Period: The p eriod f or wh ich a bu dge t is prep ared and use d, whi ch may the n b y su b- d ivi ded into co ntrol pe riods.
Budgetary Control: The e stabli shmen t of bu dge ts relati ng to resp onsib iliti es of executives to th e requ iremen ts of a pol icy, and the continu ous compa riso n of a ctual with b udgeted results, e ithe r to secure b y individu al a ctio n the objective of that p oli cy o r to provide a basis for this re vision.
Budget Centre : A sectio n of an en tity f or which control may be exercise d a nd budgets p repared.
By-product: A pro duct which is recove red in cid ent ally f rom the mate rial u se d in th e manufacture of recog nised main p ro du cts, such a by-p rodu ct havin g either a net realisabl e v alu e or a usable value whi ch is rela tively l o w in co mp arison with t he salea ble value of th e main products. By-pro ducts may be f urth er p roce ssed to in crea se the ir realisable v alue.
C
Capital Ex penditure Budget: A plan f or capital e xpend iture in moneta ry te rms.
Capital Expenditure: Exp enditure o n fi xe d a ssets or additions th ereto inten ded to benef it fu ture a ccoun ting periods (in contra st to revenu e expendit ure whi ch b enefits a cu rrent period) o r e xpenditure wh ich increases the capa city, effi cie ncy, lif e sp an or e conomy of opera tion of a n existing fixed a sset.
Cas h Flow Budget: A de tailed budge t of inco me a nd ca sh expe nditure incorporati ng bot h re ven ue and capita l ite ms.
Th e cash flow b udg et should b e pre pare d in the same fo rmat in whi ch the a ctu al p osi tion is to b e pre sented. The ye ar’s budget is usuall y phased into sh orte r peri ods f or con trol, e .g. monthly o r qua rterly.
Cha ngeover Time: The time required to change a work stati on f ro m a state of readine ss f or o ne o pera tion to a sta te of rea din ess for ano ther.
Common Costs: Shared cost s of mo re th an one product or service, whe re th e share d p roportion s are de termined by managemen t de cision .
Contribution Centre: A prof it centre who se expendi ture is re port ed on a marginal o r direct cost basis.
Conti nuous Ope ration/ Proces s Costing: The ba si c co sti ng method ap pli ca ble wh ere go ods o r services result f ro m a se quence of continuous or repetitiv e operat ion s or processes to wh ich costs a re charged b efore being ave rage d over the u nits pro duced duri ng t he perio d.
Contra ct Cost: Aggre gated co sts re lative to a single cont ra ct de si gna ted as cost uni t. This u sually ap plied to ma jor long term co ntracts as dist in ct f ro m sho rt term jo b co sts.
Contra ct Costing: Tha t form of spe cifi c o rder costing which ap pli es where wo rk i s un derta ke n to customer’ s special requiremen ts a nd each orde r is of lo ng d uration (compa re d wit h tho se to whi ch jo b costin g applie s) The work i s usually co nstructional and in gen eral th e method is similar to job costing.
Contribution: Sal es v alue le ss variable cost of sale s. It may be expre ssed as total contribution, co ntribution pe r unit or a s a pe rcen tage of sales.
Control lable or M anaged Cost: A co st, charg eable to a bu dge t or co st -cent re, which can b e influ enced by t he a cti ons of t he person i n who m cont rol of the ce ntre is v ested .
It i s no t alwa ys possi ble to pre dete rmin e respo nsi bility, because th e rea son f or devi atio n f rom e xpe cte d pe rformance may on ly become evident late r. For e xa mpl e, e xcessive scrap may arise f ro m i nadequ ate sup erv ision o r f rom lat ent defe ct i n pu rchased mate rial.
Conversion Cost: Costs of conv erti ng materi al input into semi -f ini sh ed or f inished p rodu cts, i. e. ad diti onal dire ct mate rial s, di rect wa ges, di rect e xp enses and absorbed pro duction o verh ead .
Cos t Ce ntre : A productio n or se rvice lo cation, fu nction a ctivity or item of equipmen t wh ose cost ma y b e at tribu ted t o cost uni ts.
Cos t Ac counting: The est abli shmen t of bu dge ts, standard costs an d actual co sts of o peration s, pro ce sses a ctiviti es o r prod uct s and the a nal ysis of va riances, profitab ilit y or the social u se of funds. The u se of the term costing is not recommended exce pt with a qualif yin g a djectiv e e .g., standard co sti ng.
Cos t (as a noun) : The a mo unt of expendit ure (a ctual or n otional) incurre d on , or attribu tabl e to , a specified thing or a ctivity.
(a s a verb ) : to ascerta in the cost of a sp ecifie d thing or activity.
Th e word Cost ca n rarely sta nd alon e and should b e q ualified as to its natu re and limi tations.
Cos t All ocation: Tha t part of cost attributi on whi ch charges spe cif ic cost t o a co st centre or cost unit.
Cos t Apportionment: That p art of co st a ttribu tion which share s costs a mong t wo or more cost centre s o r cost un its in p ropo rtion to the estimated ben efi t receiv ed u sin g a p roxy, e .g. squa re metre s.
Cos t As certai nme nt: The collection of costs attri butable to cost centres a nd cost units using th e costing me thod s, p rincipl es and technique s p rescrib ed f or a p articul ar bu sin ess e ntity.
Cos t Attri bution: The process of relating cost to cost cent res or cost units u si ng cost a llocati on o r co st appo rtion ment.
Cos t of Sales : Th e sum of di rect co st of sa les plus f actory overh ead att ributable to the tu rnover.
In ma nag ement a ccoun ts th is may be referre d to a s pro ductio n co st of sa les, or cost of go ods sold .
Cos t Unit: A unit of prod uct or service in relat ion to wh ich costs are a scertaine d.
Cos t Unit Rate: A ra te calculated b y d ivi ding the budge t or estimate d overhead cost a ttribu tabl e to a cost cent re by th e amount of dire ct labou r cost expected to b e incurre d (or whi ch would relate t o working at normal capaci ty) a nd e xp ressing the result as a pe rcentage.
Current Standard : A standard establi sh ed for use ov er a lo ng pe riod f ro m whi ch a curren t standard can be develope d.
D
Depre cia tion: The me asu re of th e wea ring o ut, consumpti on or o ther loss of v alu e of a f ixed a sset wh eth er a risi ng f rom use , d eflu xio n of time or o bsolescence through technolog y an d market chan ges (SSAP 1 2).
Develop ment Cos t: The co st of using scien tific or tech nical knowl edg e in order to prod uce n ew o r substan tially impro ved mate rial s, devices, p rodu cts, p rocesses, systems o r servi ces p rior to the commencement of comme rcial pro ductio n (SSAP 1 3)
Direc t Cost of Sales : The sum of dire ct materi als con sumed , dire ct wag es, direct expenses a nd varia ble production overhead.
In ma nagement accou ntin g this may be refe rre d to as dire ct p rodu ction cost of sales.
Direc t Expe nses : Co sts other than materi als or lab our, wh ich can be iden tified in a specified p roduct o r saleable service.
Direc t Labour Cost: Th e cost of re mu nera tion f or e mployees’ efforts and skills a ppl ied dire ctly to a p rodu ct o r saleable service an d wh ich can be identified separately in prod uct costs.
Direc t Ma terials Cost: The co st of materials ente ring into and becoming co nstituent elements of a p rodu ct o r saleable service an d wh ich can be identified separately in prod uct costs.
Dis tribution Cos t: Co st i ncu rred i n wareh ousing sa leable product s and in del ive ring p roducts to cu sto mers.
Direc t hours: The hou rs of emplo yee s appl ied dire ctl y to a p rodu ct o r se rvice.
Dow n time: The pe riod of ti me f or whi ch a work sta tion is not ava ilable for pro ductio n due to a fu nction al failu re.
Direc t Labour Cost Pe rc enta ge Rate : A rate ca lculat ed b y d ivi din g th e bu dge ted or estimate d o verh ead co st a ttrib utable to a cost centre by the app ropri ate number of di rect labour hours.
Hou rs may be either th e nu mber of hou rs e xpe cte d to be wo rke d, or the n umber of ho urs which wou ld relate to worki ng a t no rmal capacity.
Departme ntal/Functional Budget : A b udg et of income and /or expenditu re applicable to a p articula r f un ction.
A f unction ma y re fer to a depa rtme nt o r a proce ss.
E
Ec onomic Order Quantity: A qu anti ty of ma terials to be orde red wh ich takes into account th e o ptimum combin ation of (i) bul k disco unt s from h igh v olu me purch ases, (ii ) u sage rate, (iii) stock ho ldi ng costs, (iv ) stora ge capa ci t y, (v) o rder de livery t ime , and (vi) co st of p rocessing th e ord er.
Ele ment of Cost: Th e constituent parts of costs a ccordin g th e factors up on wh ich expen ditu re is in cu rre d viz. Ma teria ls, labour and expenses.
Equival ent Units: A no tional quan tity of comp lete d units sub stituted for an actual quantity of in co mplete physi ca l units in p rogre ss, when the agg rega te wo rk conte nt of the incomple te u nits is dee me d to be equivalent to tha t of the substituted qu antity of complet ed units, e .g., 150 u nits 50 percent co mplete = 75 eq uiv alent u nits.
Th e prin ciple a ppli es wh en op eration cost s are b eing app ortioned b et wee n work i n progress a nd comple te outpu t.
Employ ment Cos t: A g ene ric te rm given to co sts attrib utab le to a n employe e, in addi tion to g ross wag es/ salaries.
The y usual ly in clude emplo ye rs’ national he alth insu rance an d state p en sio ns contributi ons, e mployers’ pen sio n pre miu ms, holida ys with p ay, e mp loyers’ contrib utions to sickness benef it sch eme s a nd othe r benefi ts, e .g. p rotectiv e clot hing an d ca nte en sub sidies.
Exc eptions Reporting: A syst em of repo rtin g ba sed on the e xcepti on p rincipl e which focu ses a ttention on t hose items whe re pe rformance d iffe rs significantly f ro m standa rd or budget.
F
Fi xed Ove rhead Cost: The cost which accru es i n rela tion to the passa ge of time and wh ich, wit hin certain o utpu t and turn ove r limits, ten ds t o be unaffected b y f luctuati ons in the l eve ls of a ctivity (ou tput or turnov er).
Example s are rent, ra tes, insuran ce and execu tive salarie s. Oth er terms used included period cost and policy cost.
Fi rs t in, First out Price (FIFO): A met hod of pricing ma terial i ssues using the oldest p urch ase pri ce first.
Fi xed Budget: A bu dge t which i s de signed to re main u nch ang ed i rresp ective of the v olume of o utpu t or tu rnov er attai ned .
Fl exible Budge t: A bud get wh ich , by reco gni sing diff erent co st behavio ur pa tterns, is d esi gne d to ch ang e as volume of ou tpu t ch ang es.
I
Increme ntal Costing : A technique used in the pre para tion of ad ho c info rma tion whe re conside ration is given to a range of g radu ate d or ste ppe d changes in the level o r natu re of a ctivity, an d the add itio nal costs and revenues likely to result f rom e ach de gree of change a re p rese nted.
Increme ntal Yield : A me asu re u se d i n capital investment app raisal whe re a ch oice lies b etwee n t wo or more p rojects.
Th e cash flo ws of project A are dedu cted from th ose of proj ect B and the rate of re turn is calcula ted on the i ncre me nta l ca sh flow.
Increme ntal Rate of Return (IRR): A percen tage discou nt rate u sed in ca pital inv e stmen t a ppraisa l whi ch b ring s th e cost of a project an d its fut ure cash inflows in to e quality.
Idle Time : The pe riod of time f or which a work station is ava ilable f o r p rodu ction but is n ot u tilised due to sho rtage of tooling mat erial, op erati ons, et c.
Ideal Sta ndard: A stand ard whi ch can be att ained un der th e mo st f avo urab le conditions wi th n o allowa nce for normal losses, wa ste and machine do wntime. Al so kn own a s p otential standard.
Inves tment Centre : A p rof it centre wh ose perfo rman ce i s me asured b y it s return o n capital e mployed.
Indirect Expe nses: Expe nses which are no t charg ed di rectly to a prod uct, e .g., buildi ngs, in su rance, wa ter rat es.
Indirect Labour Cost: La bou r Costs wh ich are not ch arge d di rectly to a product, e.g ., supe rvisio n.
Indirect Ma terials Cos t: Materi als costs which are not charg ed dire ctl y to a p rodu ct, e.g . cool ant, cleani ng material s.
J
J ob Cost: Aggregated co sts rel ative to a cost uni t which consists of a single spe cifi c customer o rder o r specific task.
J ob Costing: That fo rm of specifi c orde r costing which ap plie s whe re work i s und erta ken to customers’ spe cial req uire ments and each orde r is of co mparativel y short d uration (compare d wit h tho se to wh ich co ntract co sting app lies).
Th e work is usually carried ou t with in a f actory or worksh op a nd mov es throu gh p rocesses an d o peration s as a contin uou sly identifiable unit. Th e term ma y also be applied to work su ch as p roperly re pai rs a nd th e meth od my be u se d in the co stin g of internal ca pital e xpe ndi ture jobs.
J oint Cost: Th e co sts of p rovidin g two o r m ore p rodu cts or servi ce s who se p rodu ction coul d n ot, fo r physi cal rea son s, b e segre gat ed.
Example , the co st of sh eep rea ring to pro duce b oth mutton and wool .
J oint Produc ts: Two o r more p rodu cts separa ted in the cou rse of proce ssin g, ea ch hav ing a suffi cie ntly high sale able valu e to me rit recognition a s a ma in p rodu ct.
L
Li miting Fa ctor or Key Factor: A f act or wh ich a t any ti me or ov er a period may li mit th e a ctivity of a n e ntity, of ten one where there is sh ortag e o r diffi cul ty of supply.
Long-term Strategic Planning : The formulation , ev aluation and selection of strate gies invo lving a revie w o f the objectiv es of an org anisation, the enviro nment in which it is to o perate, and a n assessmen t of its streng ths, we akn esses, opportu nities an d threa ts for th e p urpose of prepari ng a lon g te rm strate gic pl an of action whi ch wi ll a ttain the obj ective set.
La st in, Fi rs t out Price (LI FO): A method of p ricing mate rial i ssues using the la st p urch ase p rice first.
Li fe cyc le cos ting: The p ract ice of obtaini ng, ov er their lif e -times, the best use of ph ysical a ssets at th e lo west total co st to the en tity (terot echnol ogy).
Th is is achieved th roug h a co mbina tion of ma nag ement, financial , engineering and oth er d isciples.
Long Te rm Budge t: A lo ng term plan usually prepared in monetary te rms.
M
M ana gement Audi t: An objective an d independ ent a ppra isal of the effectiv ene ss of managers a nd th e ef f ective ness of the co rpora te structure i n the achievemen t of compan y o bje ctives an d p olicie s.
Its ai m i s to identif y existing an d po tential management we aknesse s within an o rganisation an d to recommen d wa ys to rectif y the se weakne sses.
M argin of Safety : The exce ss of normal o r act ual sales over sales at brea k-even poi nt
M arke ting Cos t: The cost in cu rred i n researchi ng the poten tial ma rket s a nd p romotin g p roducts in sui tabl y a ttractive f orms and at a cceptable prices.
M aste r Budget: A budget which is p repa red f ro m, an d summarises, the f un cti onal budgets. Th e te rm summa ry b udget is syno nymo us.
M achine Hour Ra te : A ra te calculated by dividing th e bu dge t or e sti mat ed ove rhea d or l abo ur a nd ov erhe ad co st attributa ble to a mach ine g roup of similar ma chine s by the a ppropriat e n umb er of ma ch ine hou rs.
Th e hou rs ma y be the n umber of ho urs for whi ch the machine or group is expected to be o perated, the number of ho urs wh ich wo uld rel ate to norma l worki ng for the f acto ry, or ful l capa cit y.
M argin: Sales less the cost of sale s expresse d either as a value or a pe rcen tage. Since the margi n ma y b e calculated at diffe rent stages, the te rms g ross and ne t ma rgin, also kno wn as g ross profit a nd et profit, a re used to differe ntia te betwee n th e levels.
M argina l Cost: Th e co st of one uni t of product or servi ce wh ich would be avo ided if that unit were no t prod uced o r provided.
Note : In th is con text, a u nit i s u sually ei ther a si ngle arti cle or a standa rd measure such as th e litre or kilo gram, but may in certai n circumsta nce s be an operation , p ro ce ss o r pa rt of a n o rganisa tion.
M argina l Costing: The accounting system in which v ariable cost are ch arge d to co st u nits an d fi xed co sts of t he period are writte n of f in f ull against the agg rega te con tribution .
N
Non-controlla ble Cos t (indirectly controll ed cos t) : A cost cha rgea ble to a bud get o r cost centre which can o nly be influenced indi rectly b y th e action s of the p erso n in whom co ntrol of th e centre is ve sted .
Typi cally, these costs wi ll be mainly a n a ppo rtion me nt of ov erhe ad costs of the en tity.
Notional Cos t: The value of a ben efit where no a ctual cost is incurre d.
O
Ope ra tion Time: The p erio d of time req uired to ca rry ou t a n op eration on a co mpl ete batch e xclusive of set-up a nd b reaking -do wn times.
Opportuni ty Cost: The value of a benefit sa crificed in fav our of an alte rnative course of a ctio n.
Ove rhead Abs orption M ethods : The charging of ove rh ea d to co st units by me ans of rates sepa rately calculated for e ach co st cen tre.
In mo st cases the rates are predete rmin ed.
Ove rhead Cost: Th e total cost of indirect materials, indirect labou r and ind irect expe nse s.
P
Prime Cost: The total co st of di re ct mat erials, direct labou r and di rect expen ses.
Th e term prime co st is commonly restri cted to dire ct production co sts only and so do es n ot customarily include direct prod uction costs onl y and so doe s not customarily include direct costs of ma rke ting or resea rch and dev elopment .
Production Cost: Prime cost plus absorbe d pro ductio n ov erhead .
Pol icy Cost: Costs in cu rre d as a re sult of taking a p articula r poli cy d eci sio n. For example, o wn ership of assets will creat e a ch arge for dep reciati on. Dep reciati on is, the ref ore , a policy cost.
Product Cost : The cost of a f inished pro duct built up f ro m i ts cost ele me nts.
An e xa mple of a product cost which provi des f or a f i rst estimate , a su bsequ en t standard cost a nd fo r sto ck valua tion s a t va riou s wo rk in pro gress stage.
Pe rpetual Inventory : Th e re co rding a s they o ccur of receip ts, issues, an d th e re sulting b alan ce s of individu al items of sto ck in either qu ali ty o r qua ntit y and v alu e.
Phy sic al Inventory : An invento ry d etermined b y a ctual coun t, wei ght or measuremen t.
Proc ess Time : The perio d of time which elapses between t he start a nd f inish of o ne p rocess o r sta ge of a p rocess.
Production Cost Centre: A cost in which prod uction is carried on: this may embrace on e specifi c op eration , e.g ., ma chine , or a co ntin uou s p roce ss, e.g., di stillation .
Profit Centre : A pa rt of a bu siness acco unta ble for co sts and revenue s. It may b e called a b usi ness cen tre, b usi ness unit , or strategic bu sin ess unit .
PERT (Proje ct Eva luation and Review Technology) : A spe cifica tion of all activities events a nd constrai nts relating to a p roje ct, f ro m wh ich a ne twork is d rawn wh ich provide s a model of th e wa y the project shoul d pro ce ed.
Product Life Cycle : The pa ttern of dema nd for a prod uct or servi ce ove r time.
Princ iple Budget Fac tor: A fa cto r wh ich , a t a part icu lar time or ov er a pe riod, will limit th e a ctiviti es of an underta kin g a nd wh ich is, the ref ore , taken into acco unt i n preparing bud gets.
Publicity Cost: (a) Co st in cu rred i n advertising and p romotion as aids to the ev ent ual sales of g ood s or services.
(b ) Cost i ncu rred in adve rtising and promoti on of an en tit y a s distinct f rom it s products or service s (p ubli c relations)
R
Raw Materia ls: Unprocessed sto ck a wa iting co nv ersi on.
Cos t: Cost incurred in securin g orders, usuall y including sale smen’s salari es, commissions a nd travellin g e xpe nses.
Short te rm Budget: A bu dge t established for u se ove r a short period of time (usually one ye ar b ut someti me s less) and wh ich th e person respo nsible is expected to achieve and use for control purposes.
Sta ndard: A Pre det ermined me asurable q uan tity se t in defi ned condi tion s a gai nst which actual p erf ormance can be compa red, usu all y fo r an ele ment of work, ope ra tio n or a ctivit y.
While standa rd s may be base d on unquestion ed and i mmuta ble natural la w o r fact s, they a re fi nal ly se t by human ju dge ment a nd consequ entl y are su bje ct to the sa me fallib ilit y which a ttend s all huma n activity. Thu s a sta nda rd for 1 00 p ercent machine ou tpu t can be fixed b y its g eared input/outp ut spee ds, bu t the eff e ctive re ali sable outp ut stan dard is o ne of ju dge me nt.
Sta ndard Cos t: A stand ard e xpre ssed in mone y. It is built up f rom an assessmen t of th e v alu e of cost elements. Its main uses are p rovi din g ba ses for performan ce mea sure ment, cont rol by e xception reporti ng, valuin g stock a nd e sta blishing selling prices.
Sta ndard Price : A pre det ermined p rice f ixed on the basis of a sp ecificatio n of a pro duct or service and of all f a cto rs affecting tha t pri ce.
Sta ndard Produc tion Cost—Total: Th e pred ete rmin ed cost of prod ucing o r p rovidin g specifi ed q uan titie s of products or se rvice at standard p erf o rman ce ov er a spe cif ied period.
Sta ndard Production Cost—Unit: Th e pre determi ned co st of producing or providing a specifi ed q uan tity of a prod uct or service at stan dard perf orma nce.
Sta ndard Profit—T otal: Th e predete rmined p rof it a rising f ro m the sale of actual qua ntities of p roducts or servi ce s a t sta nda rd selling prices, ov er a spe cif ied perio d.
Sta nda rd profi t may be a t th e level of net prof it, gross profit, or con tribu tion . Profit which re late s only to tra din g activities i s of ten ref erre d to as ope rating p rofit.
Sta ndard Selling Price—Unit: A predetermi ned p rice for a specified u nit to be so ld. A unit may co nsi st of a sin gle item or a ba tch of p roce ssed outp ut.
Sta ndard Unit of Work: A un it of wo rk consisting of ba sic time pl us re laxation allowance an d contingency a llowa nce whe re appli cable.
Th e unit of work ma y be for l abo ur ou tpu t onl y, a co mb ina tion of machin e and la bo ur ou tput , or fo r a machin e only.
Sta ndard Time: The t otal time (h ours and min utes) in which a ta sk should b e compl eted at standard perf o rmance , i.e . ba sic time p lus continge ncy allo wa nce where applicable.
Stoc k Control: The systematic regulati on of stock lev els wi th respect to quantity, co st an d lead time.
Th e altern ative te rm i nve nto ry contro l is common in the U.S.A.
Stoc k Recorder Level: A qua nti ty of mate rial s fixed i n advan ce a t which level stocks shoul d b e reo rdered.
Stoc ktak ing: A p rocess where by stocks (which may comp rise direct and indi rect materi als, work in prog ress an d finished go ods) are physi cally cou nte d and are the n valu ed i tem by ite m.
Th is may be a t a p oin t i n time (p erio dic) o r b y co unti ng an d val uin g a number of ite ms at d iffere nt ti me s (conti nuo us)
Se rvice Cost Centre: A cost centre p rov iding servi ce s to othe r cost centre s. W hen the outp ut of a n organi sation i s a servi ce, rathe r t han g ood s, a n alternative term i s no rmally u se d, e.g ., support cost ce ntre or uti lity co st cen tre.
Sc ra p: Disca rded material wh ich ha s some re covery v alu e an d wh ich is usually either d isp osed of with out fu rther trea tment (oth er than re cl amatio n and handling), or rein trodu ce d in to th e p rodu ctio n p roce ss in pla ce of raw m ate rial .
Se t-up Time: The time require d to prepare a work sta tion f rom a standa rd con diti on t o re adiness to co mmence a sp ecifie d op erat ion.
Stoc k: Any curre nt asset held for co nversion in to cash in the normal course of tra din g, e.g ., ra w mate rial s, wo rk-in progre ss, finished goods a nd good s i n tran sit , or on co nsignmen t, or o n sale or return.
Sunk Cost: Sha red costs of more than one prod uct o r service, whe re the sha red proportions a re de termined by managemen t decision s.
Se mi-Varia ble Cost/Se mi-Fixed Cos t: A co st containin g both f i xed and variable el ements, a nd wh ich is thus pa rtly affe cte d by flu ctu ation in the level of a ctivity.
Se rvice /Func tion Costing: Co st acco unting for servi ces or functio ns, e .g., canteens, maintenance, pe rso nnel. Th ese ma y b e ref e rred to as se rvice centre s, d epa rtments or fu nction s.
Spe cific Orde r Costing: The basic cost a ccoun ting me thod applicable wh ere th e wo rk consists of separa te con tract s, jobs or batches.
T
Turnove r: Amou nts derive d f rom the provi sio n of goods and se rvices falling within th e compan y’s o rdinary a ctivitie s, af ter ded uction of trade discounts, value added tax, and any o ther t axe s b ased o n the amou nts so derived (Companies Act )
Th is would no rmally be inv oiced sales less returns an d al lowa nce s.
U
Under-or-over-a bsorbe d overhea d: The dif feren ce betwe en ove rhea d cost incurred an d o verh ead co st a bsorbe d; it ma y b e split into its tow constitu te parts for control p urpo ses.
Uniform Cos ting: The u se by sev eral un dert akings of th e same costi ng systems, i.e., th e same ba sic costing me thod s, p rinciples and techni que s.
V
Va lue Ana lys is: A systematic in ter-di scipl inary e xamina tion of f actors affecting th e cost of a p roduct o r servi ce, in orde r to devise mea ns of ach iev ing th e specified purp ose most e conomica lly at the requi red stan dard of qual ity and reliability.
Va ria nce : Th e dif feren ce be tween p lan ned , b udgeted, or standard cost and actual costs
(a nd simila rl y i n respe ct of rev enu es)
Note : This is not to be co nfused with th e stati stical vari ance wh ich me asu res the d isp ersion of a stati stical pop ula tion .
Va ria nce Analysis: The anal ysis of va riance a risi ng in a standard costing system into thei r constituent parts.
It is the analysis and compa riso n of th e f actors which have cau sed the d ifference bet ween p redetermined st andards an d actua l result s, wi th a view to eliminating inefficien cie s.
Va ria ble Cost: Cost whi ch tend s to va ry wit h the level of a ctivity.
Va ria ble Ove rhead Cost: Overh ead cost wh ich tends to vary wi th c ha nge s in the leve l of a ctivity.
W
Weighte d Ave ra ge Pri ce: A me thod of p ricing ma terial issue s u sing a price wh ich is cal culate d b y d ivi ding the total cost of mate rial in stock b y th e total quantity in sto ck.
Waiting Time: The peri od of time for which an op erator i s availa ble fo r p rodu ction but is p reve nted f rom working by sto rage of mate rial or to oling, machin e b reakdown .
Waste : Di scarde d substan ces havi ng no v alue (as di stin ct f rom scrap)
Work in progres s: Any ma terial, co mpone nt, pro duct or co ntract at a n inte rmedia te stage of comple tion .
Z
Ze ro Ba se Budge ting: A method of b udgeting where by all a ctivities a re re -ev alu ated each ti me a budget i s se t. Discrete lev els of ea ch a ctivity are valued and a combinati on chosen t o match fu nds avail abl e.
Ea ch f unctional budget starts with the a ssumptio n tha t t he f un cti on do es not exist a nd is a t zero co sts. Incre me nts of cost a re compa red with in cre men ts of be nef it, cul mi nati ng in th e p lanned ma ximum benefi t f or a given bu dge t co st.
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