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By-product

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Definition of By-product

By-product Image 1

By-product

A material created incidental to a production process, which can be
sold for value.


By-product

A product that is an ancillary part of the primary production process, having
a minor resale value in comparison to the value of the primary product being
manufactured. Any proceeds from the sale of a by-product are typically offset
against the cost of the primary product, or recorded as miscellaneous revenue.


by-product

an incidental output of a joint process; it is salable,
but the sales value of by-products is not substantial enough
for management to justify undertaking the joint process; it
is viewed as having a higher sales value than scrap



Related Terms:

activity driver

a measure of the demands on activities and,
thus, the resources consumed by products and services;
often indicates an activity’s output


Modular bill of material

A bill of material format in which components and subassemblies
are clustered by product option, so one can more easily plan for the
assembly of finished goods with different configurations.


pull system

a production system dictated by product sales
and demand; a system in which parts are delivered or produced
only as they are needed by the work center for which
they are intended; it requires only minimal storage facilities



Absorption costing

A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.


absorption costing

a cost accumulation and reporting
method that treats the costs of all manufacturing components
(direct material, direct labor, variable overhead, and
fixed overhead) as inventoriable or product costs; it is the
traditional approach to product costing; it must be used for
external financial statements and tax returns


By-product Image 1

Absorption costing

A methodology under which all manufacturing costs are assigned
to products, while all non-manufacturing costs are expensed in the current period.


Abusive Earnings Management

The use of various forms of gimmickry to distort a compAny's true financial performance in order to achieve a desired result.


Abusive Earnings Management

A characterization used by the Securities and Exchange
Commission to designate earnings management that results in an intentional and material misrepresentation
of results.


Accelerated cost recovery system (ACRS)

Schedule of depreciation rates allowed for tax purposes.


Account Value

The sum of all the interest options in your policy, including interest.


Accumulated Value

An amount of money invested plus the interest earned on that money.


Activity-based costing

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.


activity based costing (ABC)

A relatively new method advocated for the
allocation of indirect costs. The key idea is to classify indirect costs,
mAny of which are fixed in amount for a period of time, into separate
activities and to develop a measure for each activity called a cost driver.
The products or other functions in the business that benefit from the
activity are allocated shares of the total indirect cost for the period based
on their usage as measured by the cost driver.


activity-based costing (ABC)

a process using multiple cost drivers to predict and allocate costs to products and services;
an accounting system collecting financial and operational
data on the basis of the underlying nature and extent
of business activities; an accounting information and
costing system that identifies the various activities performed
in an organization, collects costs on the basis of
the underlying nature and extent of those activities, and
assigns costs to products and services based on consumption
of those activities by the products and services


By-product Image 2

Activity-based costing (ABC)

A cost allocation system that compiles costs and assigns
them to activities based on relevant activity drivers. The cost of these activities can
then be charged to products or customers to arrive at a much more relevant allocation
of costs than was previously the case.


activity-based management (ABM)

a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received
by a customer and the resulting profit achieved by providing
this value



Actual cost

The actual expenditure made to acquire an asset, which includes the supplierinvoiced
expense, plus the costs to deliver and set up the asset.


actual cost system

a valuation method that uses actual direct
material, direct labor, and overhead charges in determining
the cost of Work in process Inventory


Adjusted present value (APV)

The net present value analysis of an asset if financed solely by equity
(present value of un-levered cash flows), plus the present value of Any financing decisions (levered cash
flows). In other words, the various tax shields provided by the deductibility of interest and the benefits of
other investment tax credits are calculated separately. This analysis is often used for highly leveraged
transactions such as a leverage buy-out.


administrative department

an organizational unit that performs management activities benefiting the entire organization;
includes top management personnel and organization
headquarters


Advance material request

Very early orders for materials before the completion
of a product design, given the long lead times required to supply some items.


Agency cost view

The argument that specifies that the various agency costs create a complex environment in
which total agency costs are at a minimum with some, but less than 100%, debt financing.


Agency costs

The incremental costs of having an agent make decisions for a principal.


Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.


Aggressive Cost Capitalization

cost capitalization that stretches the flexibility within generally
accepted accounting principles beyond its intended limits, resulting in reporting as assets
items that more reasonably should have been expensed. The purpose of this activity is likely to
alter financial results and financial position in order to create a potentially misleading impression
of a firm's business performance or financial position.


By-product Image 3

All-in cost

Total costs, explicit and implicit.



Amortized Cost

cost of a security adjusted for the amortization of Any purchase premium or
discount.


appraisal cost

a quality control cost incurred for monitoring
or inspection; compensates for mistakes not eliminated
through prevention activities


approximated net realizable value at split-off allocation

a method of allocating joint cost to joint products using a
simulated net realizable value at the split-off point; approximated
value is computed as final sales price minus
incremental separate costs


Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.


attribute-based costing (ABC II)

an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute
enhancements that the compAny wants to integrate into a product


Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.


Average-Cost Inventory Method

The inventory cost-flow assumption that assigns the average
cost of beginning inventory and inventory purchases during a period to cost of goods sold and
ending inventory.


Average cost of capital

A firm's required payout to the bondholders and to the stockholders expressed as a
percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total
required cost of capital by the total amount of contributed capital.


Avoidable costs

costs that are identifiable with and able to be influenced by decisions made at the business
unit (e.g. division) level.


backflush costing

a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
few allocations, uses standard costs, and has minimal variances
from standard


Bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.


Batch cost

A cost that is incurred when a group of products or services are produced,
and which cannot be identified to specific products or services within each group.


batch-level cost

a cost that is caused by a group of things
being made, handled, or processed at a single time


Benefit Value

The amount of cash payable on a benefit.


Best-efforts sale

A method of securities distribution/ underwriting in which the securities firm agrees to sell
as much of the offering as possible and return Any unsold shares to the issuer. As opposed to a guaranteed or
fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm
holding Any unsold shares in its own account if necessary).


Bill of materials

A listing of all the materials and quantities that go to make up a completed product.


bill of materials

a document that contains information about
the product materials components and their specifications
(including quality and quantities needed)


Bill of materials

An itemization of the parts and subassemblies required to create a
product, frequently including assumed scrap rates that will arise as part of the production
process.


Bill of materials (BOM)

A listing of all parts and subassemblies required to produce one
unit of a finished product, including the required number of units of each part
and subassembly.


Blue-chip company

Large and creditworthy compAny.


Bond value

With respect to convertible bonds, the value the security would have if it were not convertible
apart from the conversion option.


Book value

A compAny's book value is its total assets minus intangible assets and liabilities, such as debt. A
compAny's book value might be more or less than its market value.


BOOK VALUE

An asset’s cost basis minus accumulated depreciation.


Book Value

The value of an asset as carried on the balance sheet of a
compAny. In reference to the value of a compAny, it is the net worth
(equity) of the compAny.


Book value

An asset’s original cost, less Any depreciation that has been subsequently incurred.


book value

Net worth of the firm’s assets or liabilities according
to the balance sheet.


book value and book value per share

Generally speaking, these terms
refer to the balance sheet value of an asset (or less often of a liability) or
the balance sheet value of owners’ equity per share. Either term emphasizes
that the amount recorded in the accounts or on the books of a business
is the value being used. The total of the amounts reported for
owners’ equity in its balance sheet is divided by the number of stock
shares of a corporation to determine the book value per share of its capital
stock.


BOOK VALUE OF COMMON STOCK

The theoretical amount per share that each stockholder would receive if a compAny’s assets were sold on the balance sheet’s date. Book value equals:
(Stockholders’ equity) / (Common stock shares outstanding)


Book value per share

The ratio of stockholder equity to the average number of common shares. Book value
per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation
(and not necessarily market valuation).


Book Value per Share

The book value of a compAny divided by the number of shares
outstanding


Bottom-up equity management style

A management style that de-emphasizes the significance of economic
and market cycles, focusing instead on the analysis of individual stocks.


Breeder bill of materials

A bill of material that accounts for the generation and
cost implications of byproducts as a result of manufacturing the parent item.


budgeted cost

a planned expenditure


business process reengineering (BPR)

the process of combining information technology to create new and more effective
business processes to lower costs, eliminate unnecessary
work, upgrade customer service, and increase
speed to market


business-value-added activity

an activity that is necessary for the operation of the business but for which a customer would not want to pay


Capital Cost Allowance (CCA)

The annual depreciation expense allowed by the Canadian Income Tax Act.


CAPITAL IN EXCESS OF PAR VALUE

What a compAny collected when it sold stock for more than the par value per share.


capitalization of costs

When a cost is recorded originally as an increase
to an asset account, it is said to be capitalized. This means that the outlay
is treated as a capital expenditure, which becomes part of the total
cost basis of the asset. The alternative is to record the cost as an expense
immediately in the period the cost is incurred. Capitalized costs refer
mainly to costs that are recorded in the long-term operating assets of a
business, such as buildings, machines, equipment, tools, and so on.


Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against

future-period revenue.


Carring costs

costs that increase with increases in the level of investment in current assets.


carrying cost

the total variable cost of carrying one unit of
inventory in stock for one year; includes the opportunity
cost of the capital invested in inventory


Carrying cost

The cost of holding inventory, which can include insurance,
spoilage, rent, and other expenses.


carrying costs

costs of maintaining current assets, including opportunity cost of capital.


Carrying value

Book value.


Cash cost

The amount of cash expended.


Cash management bill

Very short maturity bills that the Treasury occasionally sells because its cash
balances are down and it needs money for a few days.


Cash-surrender value

An amount the insurance compAny will pay if the policyholder ends a whole life
insurance policy.


Cash Surrender Value

This is the amount available to the owner of a life insurance policy upon voluntary termination of the policy before it becomes payable by the death of the life insured. This does not apply to term insurance but only to those policies which have reduced paid up values and cash surrender values. A cash surrender in lieu of death benefit usually has tax implications.


Cash Surrender Value

Benefit that entitles a policy owner to an amount of money upon cancellation of a policy.


Cash value added (CVA)

A method of investment appraisal that calculates the ratio of the net present value of an
investment to the initial capital investment.


Certified Management Accountant (CMA)

a professional designation in the area of management accounting that
recognizes the successful completion of an examination,
acceptable work experience, and continuing education requirements


Closing sale

A transaction in which the seller's intention is to reduce or eliminate a long position in a stock,
or a given series of options.


Collection Department

An internal department within a compAny staffed by specialists in collecting past due accounts or accounts receivable.


committed cost

a cost related either to the long-term investment
in plant and equipment of a business or to the
organizational personnel whom top management deem
permanent; a cost that cannot be changed without longrun
detriment to the organization


Company Acquisitions

Assets acquired to create money. May include plant, machinery and equipment, shares of another compAny etc.


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.


Company-specific risk

Related: Unsystematic risk


Companyspecific Risk

See asset-specific risk


Comparison universe

The collection of money managers of similar investment style used for assessing
relative performance of a portfolio manager.


Completion undertaking

An undertaking either (1) to complete a project such that it meets certain specified
performance criteria on or before a certain specified date or (2) to repay project debt if the completion test
cannot be met.


Conditional Sale

A type of agreement to sell whereby a seller retains title to goods sold and delivered to a purchaser until full payment has been made.


Conditional Sale Agreement

An agreement entered into between a conditional buyer and a conditional seller setting out the terms under which goods change hands.


Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance compAny to whom the manufacturer has sold the conditional
sales contract.


Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.


controllable cost

a cost over which a manager has the ability to authorize incurrence or directly influence magnitude


conversion cost

Refers to the sum of manufacturing direct labor and overhead
costs of products. The cost of raw materials used to make products
is not included in this concept. Generally speaking, this is a rough measure
of the value added by the manufacturing process.


conversion cost

the total of direct labor and overhead cost;
the cost necessary to transform direct material into a finished good or service


Conversion value

Also called parity value, the value of a convertible security if it is converted immediately.


Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.


Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.


Cost

A resource sacrificed or forgone to achieve a specific objective (Horngren et al.), defined
typically in monetary terms.


cost

the cash or cash equivalent value necessary to attain an
objective such as acquiring goods and services, complying
with a contract, performing a function, or producing and
distributing a product


Cost

The expense incurred to create and sell a product or service. If a product is not
sold, then it is recorded as an asset, whereas the sale of a product or service will
result in the recording of all related costs as an expense.


cost accounting

a discipline that focuses on techniques or
methods for determining the cost of a project, process, or
thing through direct measurement, arbitrary assignment, or
systematic and rational allocation



 

 

 

 

 

 

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