|Average-Cost Inventory Method|
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Definition of Average-Cost Inventory Method
Average-Cost Inventory Method
The inventory cost-flow assumption that assigns the average
A method for dividing inventory into classifications,
A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.
a cost accumulation and reporting
A methodology under which all manufacturing costs are assigned
Schedule of depreciation rates allowed for tax purposes.
A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.
A relatively new method advocated for the
a process using multiple cost drivers to predict and allocate costs to products and services;
A cost allocation system that compiles costs and assigns
The actual expenditure made to acquire an asset, which includes the supplierinvoiced
a valuation method that uses actual direct
The argument that specifies that the various agency costs create a complex environment in
The incremental costs of having an agent make decisions for a principal.
cost capitalization that stretches the flexibility within generally
a process of service department cost allocation
Total costs, explicit and implicit.
A method of adjusting accounts receivable to the amount that is expected to be collected based on company experience.
cost of a security adjusted for the amortization of any purchase premium or
a quality control cost incurred for monitoring
Arithmetic average (mean) rate of return
Arithmetic mean return.
attribute-based costing (ABC II)
an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute
An arithmetic mean of selected stocks intended to represent the behavior of the market or some
Average accounting return
The average project earnings after taxes and depreciation divided by the average
Average (across-day) measures
An estimation of price that uses the average or representative price of a
Average age of accounts receivable
The weighted-average age of all of the firm's outstanding invoices.
Average Amortization Period
The average useful life of a company's collective amortizable asset base.
Average Collection Period
average number of days necessary to receive cash for the sale of
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
Average cost of capital
A firm's required payout to the bondholders and to the stockholders expressed as a
The beginning inventory for a period, plus the amount at the end of
Also referred to as the weighted-average life (WAL). The average number of years that each
The average time to maturity of securities held by a mutual fund. Changes in interest rates
Average Propensity to Consume
Ratio of consumption to disposable income. See also marginal propensity to consume.
Average Propensity to Save
Ratio of saving to disposable income. See also marginal propensity to save.
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
Average tax rate
Taxes as a fraction of income; total taxes divided by total taxable income.
average tax rate
Total taxes owed divided by total income.
costs that are identifiable with and able to be influenced by decisions made at the business
a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
Bankruptcy cost view
The argument that expected indirect and direct bankruptcy costs offset the other
A cost that is incurred when a group of products or services are produced,
a cost that is caused by a group of things
Benefit Ratio Method
The proportion of unemployment benefits paid to a company’s
Benefit Wage Ratio Method
The proportion of total taxable wages for laid off
Blanket inventory lien
A secured loan that gives the lender a lien against all the borrower's inventories.
The amount of money invested in inventory, as per a company’s
Bootstrapping, bootstrap method
An arithmetic method for backing an
a planned expenditure
Capital Cost Allowance (CCA)
The annual depreciation expense allowed by the Canadian Income Tax Act.
A method of constructing a replicating portfolio in which the manager purchases a
capitalization of costs
When a cost is recorded originally as an increase
Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against
costs that increase with increases in the level of investment in current assets.
the total variable cost of carrying one unit of
The cost of holding inventory, which can include insurance,
costs of maintaining current assets, including opportunity cost of capital.
The amount of cash expended.
a cost related either to the long-term investment
company cost of capital
Expected rate of return demanded by investors in a company, determined by the average risk of the company’s assets and operations.
A contract accounting method that recognizes contract revenue
a cost over which a manager has the ability to authorize incurrence or directly influence magnitude
Refers to the sum of manufacturing direct labor and overhead
the total of direct labor and overhead cost;
A resource sacrificed or forgone to achieve a specific objective (Horngren et al.), defined
the cash or cash equivalent value necessary to attain an
The expense incurred to create and sell a product or service. If a product is not
a discipline that focuses on techniques or
Cost Accounting Standards Board (CASB)
a body established by Congress in 1970 to promulgate cost accounting
the approach to product costing that determines
the assignment, using some reasonable basis,
the practice of finding acceptable alternatives
An asset’s purchase price, plus costs associated with the purchase, like installation fees, taxes, etc.
The idea that fixed costs and variable costs react differently to changes in the volume of
The calculation and comparison of the costs and benefits of a policy or project.
cost-benefit analysis the analytical process of comparing the
relative costs and benefits that result from a specific course
The net present value of an investment divided by the investment's initial cost. Also called
a responsibility center in which the manager has
A division or unit of an organization that is responsible for controlling costs.
Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of
a company-wide attitude about the topics
the practice of minimizing, to the extent
The process of either reducing costs while maintaining the same level of productivity or maintaining costs while increasing productivity.
cost control system
a logical structure of formal and/or informal
A method of expensing the cost of a resource consumed by first determining
The most significant cause of the cost of an activity, a measure of the demand for an activity
a factor that has a direct cause-effect relationship
A factor that directly impacts the incidence of a cost, and which is generally
cost driver analysis
the process of investigating, quantifying,
cost leadership strategy
a plan to achieve the position in a
cost management system (CMS)
a set of formal methods
Anything for which a measurement of cost is required – inputs, processes, outputs or responsibility centres.
An item for which a cost is compiled. For example, this can be a product,
Cost of capital
The required return for a capital budgeting project.
Cost of capital
The costs incurred by an organization to fund all its investments, comprising the risk-adjusted
cost of capital
Refers to the interest cost of debt capital used by a business
Cost of Capital
The minimum rate of return a company must earn in order to meet
Cost of capital
The blended cost of a company’s currently outstanding debt instruments
Cost of Capital
The discount rate that should be used in the capital budgeting process.
cost of capital (COC)
the weighted average cost of the
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