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Definition of Hoarding

Hoarding Image 1


See labor hoarding.

Related Terms:

Labor Hoarding

Not laying off redundant workers during a recession to ensure that skilled and experienced workers are available after the recession.

direct labor

the time spent by individuals who work specifically
on manufacturing a product or performing a service;
the cost of such time

labor efficiency variance

the number of hours actually worked minus the standard hours allowed for the production
achieved multiplied by the standard rate to establish
a value for efficiency (favorable) or inefficiency (unfavorable)
of the work force

labor mix variance

(actual mix X actual hours X standard rate) - (standard mix X actual hours X standard rate);
it presents the financial effect associated with changing the
proportionate amount of higher or lower paid workers in production

labor rate variance

the actual rate (or actual weighted average rate) paid to labor for the period minus the standard rate multiplied by all hours actually worked during the period;
it is actual labor cost minus (actual hours X standard rate)

labor yield variance

(standard mix X actual hours X standard rate) - (standard mix X standard hours X standard rate);
it shows the monetary impact of using more or fewer total hours than the standard allowed

Direct labor

labor that is specifically incurred to create a product.

Hoarding Image 1

Indirect labor

The cost of any labor that supports the production process, but which is
not directly involved in the active conversion of materials into finished products.

Labor efficiency variance

The difference between the amount of time that was budgeted
to be used by the direct labor staff and the amount actually used, multiplied
by the standard labor rate per hour.

Labor rate variance

The difference between the actual and standard direct labor rates
actually paid to the direct labor staff, multiplied by the number of actual hours

Labor Force

Those people employed plus those actively seeking work.

Fair Labor Standards Act of 1938

A federal Act creating standards of overtime
pay, minimum wages, and payroll recordkeeping.

Common market

An agreement between two or more countries that permits the free movement of capital
and labor as well as goods and services.

Consumer Price Index (CPI)

The CPI, as it is called, measures the prices of consumer goods and services and is a
measure of the pace of U.S. inflation. The U.S.Department of labor publishes the CPI very month.

Economic union

An agreement between two or more countries that allows the free movement of capital,
labor, all goods and services, and involves the harmonization and unification of social, fiscal, and monetary

Unemployment rate

The ratio of the number of people classified as unemployed to the total labor force.

Hoarding Image 2

Cost of goods sold

The cost of merchandise that a company sold this year. For manufacturing companies, the cost of raw
materials, components, labor and other things that went into producing an item.


Those that vary with the amount of goods you produce or sell. These may include utility bills, labor, etc.

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.

overhead costs

Overhead generally refers to indirect, in contrast to direct,
costs. Indirect means that a cost cannot be matched or coupled in any
obvious or objective manner with particular products, specific revenue
sources, or a particular organizational unit. Manufacturing overhead
costs are the indirect costs in making products, which are in addition to
the direct costs of raw materials and labor. Manufacturing overhead
costs include both variable costs (electricity, gas, water, etc.), which vary
with total production output, and fixed costs, which do not vary with
increases or decreases in actual production output.

product cost

This is a key factor in the profit model of a business. Product
cost is the same as purchase cost for a retailer or wholesaler (distributor).
A manufacturer has to accumulate three different types of production
costs to determine product cost: direct materials, direct labor, and
manufacturing overhead. The cost of products (goods) sold is deducted
from sales revenue to determine gross margin (also called gross profit),
which is the first profit line reported in an external income statement
and in an internal profit report to managers.

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

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

conversion cost

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

European Union (EU)

an economic alliance originally created
in 1957 as the European Economic Community by
France, Germany, Italy, Belgium, the Netherlands, and Luxembourg
and later joined by the United Kingdom, Ireland,
Denmark, Spain, Portugal, and Greece; prior to the Maastricht
Treaty of 1993 was called the European Community;
has eliminated virtually all barriers to the flow of capital,
labor, goods, and services among member nations

global economy

an economy characterized by the international
trade of goods and services, the international movement
of labor, and the international flows of capital and information

joint cost

the total of all costs (direct material, direct labor,
and overhead) incurred in a joint process up to the splitoff point

Hoarding Image 3

learning curve

a model that helps predict how labor time
will decrease as people become more experienced at performing
a task and eliminate the inefficiencies associated
with unfamiliarity


any possible combination of material or labor inputs

normal cost system

a valuation method that uses actual
costs of direct material and direct labor in conjunction with
a predetermined overhead rate or rates in determining the
cost of Work in Process Inventory


any factory or production cost that is indirect to
the product or service; it does not include direct material
or direct labor; any production cost that cannot be directly
traced to the product

prime cost

the total cost of direct material and direct labor for a product

standard cost card

a document that summarizes the direct
material, direct labor, and overhead standard quantities and
prices needed to complete one unit of product

standard cost system

a valuation method that uses predetermined
norms for direct material, direct labor, and overhead
to assign costs to the various inventory accounts and
Cost of Goods Sold

variable costing

a cost accumulation and reporting method
that includes only variable production costs (direct material,
direct labor, and variable overhead) as inventoriable
or product costs; it treats fixed overhead as a period cost;
is not acceptable for external reporting and tax returns

Cost of goods sold

The accumulated total of all costs used to create a product or service,
which is then sold. These costs fall into the general sub-categories of direct
labor, materials, and overhead.

Direct costing

A costing methodology that only assigns direct labor and material costs
to a product, and which does not include any allocated indirect costs (which are all
charged off to the current period).

Factory overhead

All the costs incurred during the manufacturing process, minus the
costs of direct labor and materials.

Manufacturing resource planning (MRP II)

An expansion of the material requirements planning concept, with additional computer-based capabilities in the areas of
direct labor and machine capacity planning.

Product cost

The total of all costs assigned to a product, typically including direct
labor, materials (with normal spoilage included), and overhead.

Aggregate Production Function

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

Aggregate Supply Curve

Combinations of price level and income for which the labor market is in equilibrium. The short-run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggregate supply curve does not.

Discouraged Worker

An unemployed person who gives up looking for work and so is no longer counted as in the labor force.

Factor of Production

A resource used to produce a good or service. The main macroeconomic factors of production are capital and labor.

Institutionally Induced Unemployment

Unemployment due to institutional phenomena such as the degree of labor force unionization, the level of discrimination, and government policies such as unemployment insurance programs, minimum wages, or regulations on business.

Participation Rate

Fraction of the noninstitutionalized population 16 years of age and over that is in the labor force.


Output per unit of input, usually measured as output per hour of labor.

Structural Unemployment

Unemployment due to a mismatch between the skills or location of labor and the skills or location required by firms.

Tax-Related Incomes Policy (TIP)

Tax incentives for labor and business to induce them to conform to wage/price guidelines.

Unemployment rate

Fraction of the labor force that is not employed.

Cost of goods sold

The charge to expense of the direct materials, direct labor, and
allocated overhead costs associated with products sold during a defined accounting







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