Activity - The actual work task or
step performed in producing and delivering products and services. An
aggregation of actions performed within an organization that is useful for
purposes of activity-based costing.
Activity Analysis - The
identification and description of activities in an organization. Activity analysis
involves determining what activities are done within a department, how many
people perform the activities, how much time they spend performing the
activities, what resources are required to perform the activities, what
operational data best reflect the performance of the activities, and what
customer value the activity has for the organization. Activity analysis is
accomplished with interviews, questionnaires, observation, and review of
physical records of work. It is the foundation for agency process value
analysis, which is key to overall review of program delivery.
Activity-Based Costing - A cost
accounting method that measures the cost and performance of process
related activities and cost objects. It assigns cost to cost objects, such as
products or customers, based on their use of activities. It recognizes the
causal relationship of cost drivers to activities.
Actual Cost - An amount determined on
the basis of cost incurred including standard cost properly adjusted for
applicable variance.
Avoidable Cost - A cost
associated with an activity that would not be incurred if the activity were
not performed.
Common Cost - The cost of resources
employed jointly in the production of two or more outputs and the cost
cannot be directly traced to any one of those outputs.
Common Data Source - All of
the financial and programmatic information available for the budgetary,
cost, and financial accounting processes. It includes all financial and much
non-financial data, such as environmental data, that are necessary for
budgeting and financial reporting as well as evaluation and decision
information developed as a result of prior reporting and feedback.
Controllable
Cost - A cost that can be influenced by the action of the responsible
manager.
The term
always refers to a specified manager since all costs are controllable by
someone.
Cost - The monetary value of resources used or
sacrificed or liabilities incurred to achieve an objective, such as to
acquire or produce a good or to perform an activity or service.
Cost Accounting Practice - Any
disclosed or established accounting method or technique which is used
for measurement of cost, assignment of cost to accounting periods, and
assignment of cost to cost objects.
Cost Allocation - A
method of assigning costs to activities, outputs, or other cost objects. The
allocation base used to assign a cost to objects is not necessarily the
cause of the cost. For
example, assigning the cost
of power to machine activities by machine hours is an allocation because
machine hours are an indirect measure of power consumption.
Cost Assignment - A
process that identifies costs with activities, outputs, or other cost objects.
In a broad sense, costs can be assigned to processes, activities,
organizational divisions, products, and services. There are three methods of
cost assignment: (a) directly tracing costs wherever economically feasible, (b)
cause-and-effect, and (c) allocating costs on a reasonable and consistent
basis.
Cost Driver - Any factor that causes a
change in the cost of an activity or output. For example, the quality of
parts received by an activity, or the degree of complexity of tax returns to be
reviewed by the IRS.
Cost Finding - Cost finding techniques
produce cost data by analytical or sampling methods. Cost finding techniques
are appropriate for certain kinds of costs, such as indirect costs, items with
costs below set thresholds within programs, or for some programs in their
entirety. Cost finding techniques support the overall managerial cost
accounting process and can represent non-recurring analysis of specific costs.
Cost Object (also referred to as Cost Objective)
- An activity, output, or item whose cost is to be measured. In a
broad sense, a cost object can be an organizational division, a function, task,
product, service, or a customer.
Differential Cost - The
cost difference expected if one course of action is adopted instead of others.
Direct Cost - The cost of resources
directly consumed by an activity. Direct costs are assigned to
activities by direct tracing of units of resources consumed by individual
activities. A cost that is specifically identified with a single cost object.
Estimated Cost - The
process of projecting a future result in terms of cost, based on information
available at the time. Estimated costs, rather than actual costs, are sometimes
the basis for credits to work-in-process accounts and debits to finished goods
inventory.
Expense - Outflow or other using up
of resources or incurring liabilities (or a combination of both), the
benefits from which apply to an entity's operations for the current accounting
period, but do not extend to future periods.
Fixed Cost - A cost that does not vary
in the short term with the volume of activity. Fixed cost information is
useful for cost savings by adjusting existing capacity, or by eliminating idle
facilities. Also called Non-Variable Cost or Constant Cost.
Full-Absorption Costing - A
method of costing that assigns (absorbs) all labor, material, and service/manufacturing
facilities and support costs to products or other cost objects. The costs
assigned include those that do and do not vary with the level of activity
performed.
Full Cost - The sum of all costs
required by a cost object including the costs of activities performed by
other entities regardless of funding sources.
Incremental Cost - The
increase or decrease in total costs that would result from a decision to increase
or decrease output level, to add a service or task, or to change any portion of
operations. This
information helps in making decisions such as to contract work out, undertake a
project, or increase, decrease, modify, or eliminate an activity or product.
Indirect Cost - A cost that cannot be
identified specifically with or traced to a given cost object in an
economically feasible way.
Inter-Entity
- A term meaning between or among different
federal reporting entities. It commonly refers to activities or costs
between two or more agencies, departments, or bureaus.
Job Order Costing - A
method of cost accounting that accumulates costs for individual jobs or lots.
A job may be a service or manufactured item, such as the repair of equipment or
the treatment of a patient in a hospital.
Managerial Cost Accounting System - The organization
and procedures, whether automated or not, and whether part of the
general ledger or stand-alone, that accumulates and reports consistent and
reliable cost information and performance data from various agency feeder
systems. The accumulated and reported data enable management and other
interested parties to measure and make decisions about the agency's/segment's
ability to improve operations, safeguard assets, control its resources, and
determine if mission objectives are being met.
Opportunity Cost - The
value of the alternatives foregone by adopting a particular strategy or employing
resources in a specific manner. Also called Alternative Cost or Economic Cost.
Outcome - The results of a program
activity compared to its intended purposes. Program results may be
evaluated in terms of service or product quantity and quality, customer
satisfaction, and effectiveness.
Outputs - Any product or service
generated from the consumption of resources. It can include information
or paper work generated by the completion of the tasks of an activity.
Performance Measurement - A
means of evaluating efficiency, effectiveness, and results. A balanced
performance measurement scorecard includes financial and nonfinancial measures
focusing on quality, cycle time, and cost. Performance measurement should
include program accomplishments in terms of outputs (quantity of products or
services provided, e.g., how many items efficiently produced?) and outcomes
(results of providing outputs, e.g., are outputs effectively meeting intended
agency mission objectives?). See Statement of Federal Financial Accounting
Concepts No. 1, Objectives of Federal Financial Reporting, page 65.
Process - The organized method of
converting inputs (people, equipment, methods, materials, and
environment), to outputs (products or services). The natural aggregation of
work activities and tasks performed for program delivery.
Process Costing - A
method of cost accounting that first collects costs by processes and then allocates
the total costs of each process equally to each unit of output flowing through
it during an accounting period.
Process Value Analysis - Tools
and techniques for studying processes through customer value analysis.
Its objective is to identify opportunities for lasting improvement in the
performance of an organization. It provides an in- depth review of work
activities and tasks, through activity analysis, which aggregate to form
processes for agency program delivery. In addition to activity-based costing,
quality and cycle time factors are studied for a complete
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analysis of performance
measurement. Each activity within the process is analyzed, including whether or
not the activity adds value for the customer.
Product - Any discrete, traceable,
or measurable good or service provided to a customer. Often goods are
referred to as tangible products, and services are referred to as intangible
products. A good or service is the product of a process resulting from the
consumption of resources.
Responsibility Center - An
organizational unit headed by a manager or a group of managers who are
responsible for its activities. Responsibility centers can be measured as
revenue centers (accountable for revenue/sales only), cost centers (accountable
for costs/expenses only), profit centers (accountable for revenues and costs),
or investment centers (accountable for investments, revenues, and costs).
Responsibility Segment - A
significant organizational, operational, functional, or process component
which has the following characteristics: (a) its manager reports to the
entity's top management; (b) it is responsible for carrying out a mission,
performing a line of activities or services, or producing one or a group of
products; and (c) for financial reporting and cost management purposes, its
resources and results of operations can be clearly distinguished, physically
and operationally, from those of other segments of the entity.
Service - An
intangible product or task rendered directly to a customer.
Standard Costing - A
costing method that attaches costs to cost objects based on reasonable estimates
or cost studies and by means of budgeted rates rather than according to actual
costs incurred. The anticipated cost of producing a unit of output. A
predetermined cost to be assigned to products produced. Standard cost implies a
norm, or what costs should be. Standard costing may be based on either
absorption or direct costing principles, and may apply either to all or some
cost elements.
Support Costs - Costs of activities not
directly associated with production. Typical examples are the costs of
automation support, communications, postage, process engineering, and
purchasing.
Traceability - The ability to assign a
cost directly to a specific activity or cost object by identifying or
observing specific resources consumed by the activity or cost object.
Uncontrollable
Cost - The cost over which a responsible manager has no influence.
Unit Cost - The cost of a selected
unit of a good or service. Examples include dollar cost per ton, machine
hour, labor hour, or department hour.
Value-Added Activity - An
activity that is judged to contribute to customer value or satisfy an organizational
need. The attribute "value-added" reflects a belief that the activity
cannot be eliminated without reducing the quantity, responsiveness, or quality
of output required by a customer or organization. Value-added activities should
physically change the product or service in a manner that meets customer
expectations.
Variable Cost - A cost that varies with
changes in the level of an activity, when other factors are held
constant. The cost of material handling to an activity, for example, varies
according to the number of material deliveries and pickups to and from that
activity.
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