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Definition of Explode

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The multiplication of component requirements itemized on a bill of material
by the number of parent items required to determine total parts usage.

Related Terms:

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.

Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.

Bill and Hold Practices

Products that have been sold with an explicit agreement that delivery
will occur at a later, often yet-to-be-determined, date.
Capitalize To report an expenditure or accrual as an asset as opposed to expensing it and charging it against earnings currently.

Bill of exchange

General term for a document demanding payment.

Bill of lading

A contract between the exporter and a transportation company in which the latter agrees to
transport the goods under specified conditions which limit its liability. It is the exporter's receipt for the goods
as well as proof that goods have been or will be received.

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)

Explode Image 1

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

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.

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.

Cash-equivalent items

Temporary investments of currently excess cash in short-term, high-quality
investment media such as treasury bills and Banker's Acceptances.

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.


Raw materials or subassemblies used to make either finished goods
or higher levels of subassembly.

Cost Plus Estimated Earnings in Excess of Billings

Revenue recognized to date under the percentage-of-completion method in excess of amounts billed. Also known as unbilled accounts

Counterpart items

In the balance of payments, counterpart items are analogous to unrequited transfers in the
current account. They arise because the double-entry system in balance of payments accounting and refer to
adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs,
and revaluation of the various components of total reserves.

direct material

a readily identifiable part of a product; the cost of such a part

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Direct materials cost

The cost of all materials used in a cost object, such as finished goods.

Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.

Due bill

An instrument evidencing the obligation of a seller to deliver securities sold to the buyer.
Occasionally used in the bill market.

Earmarked material

Inventory that has been physically marked as being for a
specific purpose.

economic components model

Abrams’ model for calculating DLOM based on the interaction of discounts from four economic components.
This model consists of four components: the measure of the economic impact of the delay-to-sale, monopsony power to buyers, and incremental transactions costs to both buyers and sellers.

Federal Employer Identification Number

A unique identification number issued
by the federal government used for payroll purposes to identify the company
when it deals with the Internal Revenue Service.

Financial Numbers Game

The use of creative accounting practices to alter a financial statement
reader's impression of a firm's business performance.

Indented bill of material

A bill of material reporting format under which successively
lower levels of components are indented farther away from the left

Invoice billing

billing system in which the invoices are sent off at the time of customer orders are all separate
bills to be paid.

Item number

A number uniquely identifying a product or component.

Law of large numbers

The mean of a random sample approaches the mean (expected value) of the
population as the sample grows.

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Leveraged required return

The required return on an investment when the investment is financed partially by debt.

material mix variance

(actual mix X actual quantity X standard price) - (standard mix X actual quantity X standardprice);
it computes the monetary effect of substituting a nonstandard mix of material

material price variance

total actual cost of material purchased
minus (actual quantity of material  standard
price); it is the amount of money spent below (favorable)
or in excess (unfavorable) of the standard price for the
quantity of materials purchased; it can be calculated based
on the actual quantity of material purchased or the actual
quantity used

material quantity variance

(actual quantity X standard price) - (standard quantity allowed  standard price);
the standard cost saved (favorable) or expended (unfavorable)
due to the difference between the actual quantity
of material used and the standard quantity of material
allowed for the goods produced during the period

Material requirements planning

A computerized system used to calculate material
requirements for a manufacturing operation.

Material requirements planning (MRP)

A computer-driven production methodology
that manufactures products based on an initial demand forecast. It tends to result in
more inventory of all types than a just-in-time (JIT) production system.

material requisition form

a source document that indicates
the types and quantities of material to be placed into production
or used in performing a service; it causes materials
and its cost to be released from the Raw material Inventory
warehouse and sent to Work in Process Inventory

Material review board

A company committee typically comprising members representing
multiple departments, which determines the disposition of inventory
items that will not be used in the normal manufacturing or distribution process.

material yield variance

(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price);
it computes the difference between the
actual total quantity of input and the standard total quantity
allowed based on output and uses standard mix and
standard prices to determine variance


The proportional size of a financial misstatement. It can be construed as
the net impact on reported profits, or the percentage or dollar change in a specific
line item.


A characterization of the magnitude of a financial statement item's effect on a
company's overall financial condition and performance. An item is material when its size is
likely to influence decisions of investors or creditors.

Materials price variance

The difference between the actual and budgeted cost to
acquire materials, multiplied by the total number of units purchased.

Materials quantity variance

The difference between the actual and budgeted quantities
of material used in the production process, multiplied by the standard cost per

Materials requirement planning

Computer-based systems that plan backward from the production schedule
to make purchases in order to manage inventory levels.

materials requirements planning (MRP)

a computerbased information system that simulates the ordering and
scheduling of demand-dependent inventories; a simulation
of the parts fabrication and subassembly activities that are
required, in an appropriate time sequence, to meet a production
master schedule

Materials requisition

A document listing the quantities of specific parts to be withdrawn
from inventory.

Matrix bill of material

A bill of materials chart listing the bills for similar products,
which is useful for determining common components.

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.

Multilevel bill of material

An itemization of all bill of material components, including
a nested categorization of all components used for subassemblies.

Nonconforming material

Any inventory item that does not match its original design
specifications within approved tolerance levels.

Nonrecurring Items

Revenues or gains and expenses or losses that are not expected to recur
on a regular basis. This term is often used interchangeably with special items.

Nonsignificant part number

An identifying number assigned to a part that conveys
no other information.


(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet.

Offal material

The waste materials resulting from a production process.

online bill payment

The electronic payment of a bill via the Internet. The specified amount of the bill is electronically debited from your account.

Parent company

A company that retains control over one or more other companies.

Part number

A number uniquely identifying a product or component.

Parts requisition

An authorization to move a specific quantity of an item from

Phantom bill of material

A bill of materials for a subassembly that is not normally
kept in stock, because it is used at once as part of a higher-level assembly or
finished product.

PIN (personal identification number)

A secret code that you use to access your bank account at a bank machine or at a point of sale (POS) terminal. You may also have a PIN for banking by telephone.

predetermined overhead rate

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate


The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (total assets)

Raw material

Base-level items used by the manufacturing process to create either
subassemblies or finished goods.

Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.

Raw materials

Unprocessed goods bought for manufacture, part of inventory.

Raw materials inventory

The total cost of all component parts currently in stock that
have not yet been used in work-in-process or finished goods production.

Remanufactured parts

parts that have been reconstructed to render them capable
of fulfilling their original function.

Repair bill of material

A special bill itemizing changes needed to refurbish an
existing product.

Replacement parts

parts requiring some modification before being substituted
for another part.

Reprocessed material

material that has been reworked and returned to stock.

Required reserves

The dollar amounts based on reserve ratios that banks are required to keep on deposit at a Federal Reserve Bank.

Required Reserves

Reserves that the central bank requires commercial banks to hold.

Required return

The minimum expected return you would require to be willing to purchase the asset, that is,
to make the investment.

Required yield

Generally referring to bonds, the yield required by the marketplace to match available returns
for financial instruments with comparable risk.

Requirements explosion

The component-level requirements for a production run,
derived by multiplying the number of parent-level requirements by the component
requirements for each parent, as specified in the bill of materials.

Reserve requirements

The percentage of different types of deposits that member banks are required to hold
on deposit at the Fed.

Reserved material

material that has been reserved for a specific purpose.

Return on total assets

The ratio of earnings available to common stockholders to total assets.

Return on Total Assets Ratio

A measure of the percentage return earned on the value of the
assets in the company. It is calculated by dividing the net income
available for distribution to shareholders by the book value of all

Significant part number

An identifying number assigned to an item that conveys
additional embedded information.

Single-level bill of material

A list of all components used in a parent item.

Special Items

Significant credits or charges resulting from transactions or events that, in the
view of management, are not representative of normal business activities of the period and that
affect comparability of earnings. This term is often used interchangeably with nonrecurring

Statement billing

billing method in which the sales for a period such as a month (for which a customer also
receives invoices) are collected into a single statement and the customer must pay all of the invoices
represented on the statement.

Summarized bill of materials

A bill of materials format showing the grand total
usage requirement for each component of a finished product.


See Treasury bill.

Tax anticipation bills (TABs)

Special bills that the Treasury occasionally issues that mature on corporate
quarterly income tax dates and can be used at face value by corporations to pay their tax liabilities.

Total asset turnover

The ratio of net sales to total assets.

Total Asset Turnover Ratio

A measure of the utilization of all of a company's assets to
generate sales. It is calculated by dividing the sales figure for the
period by the book value of the net fixed assets.

total contribution margin

see contribution margin

total cost to account for

the sum of the costs in beginning
inventory and the costs of the current period

Total debt to equity ratio

A capitalization ratio comparing current liabilities plus long-term debt to
shareholders' equity.

Total Debt to Total Assets Ratio

See debt ratio

Total dollar return

The dollar return on a nondollar investment, which includes the sum of any
dividend/interest income, capital gains or losses, and currency gains or losses on the investment.
See also: total return.

total expected value (for a project)

the sum of the individual cash flows in a probability distribution multiplied by their related probabilities

total overhead variance

the difference between total actual overhead and total applied overhead; it is the amount of underapplied or overapplied overhead

total quality management (TQM)

a structural system for creating organization-wide participation in planning and implementing a continuous improvement process that exceeds
the expectations of the customer/client; the application
of quality principles to all company endeavors; it is also known as total quality control

Total return

In performance measurement, the actual rate of return realized over some evaluation period. In
fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest
on interest, and any capital gain/loss) over some i nvestment horizon.

Total revenue

total sales and other revenue for the period shown. Known as "turnover" in the UK.

total units to account for

the sum of the beginning inventory
units and units started during the current period

total variance

the difference between total actual cost incurred
and total standard cost for the output produced during
the period

Totalization Agreement

An agreement between countries whereby an employee only has to pay Social Security taxes to the country in which he or she is working

Treasury bill

Short-term U.S. government security issued at a discount from
the face value and paying the face value at maturity.

Treasury Bill

A short-term (less than one year) government discount bond.







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