amortization |
The process of spreading costs over time to reduce their impact. |
commission |
A payment given to salespeople based on the amount of a product sold. |
cost |
The amount of time, money, and labor spent to create a product or perform a service. Costs are typically expressed as a dollar amount. |
cost estimate |
Any attempt by a company to calculate the price of producing a product before making it. |
direct cost |
Any cost that can be specifically attributed to the creation of a final product. Direct costs include direct labor and direct material. |
direct labor |
The wages of the people that actually manufacture a specific product. Direct labor is a direct cost and includes only those people who are directly making the product. |
direct material |
The raw materials used in the creation of the final product. Direct material is a direct cost and includes any raw material that ends up as a part of the final product. |
factory burden |
The cost of running a factory. Factory burden involves indirect labor, indirect materials, and fixed or miscellaneous expenses. |
fixed cost |
Costs that do not change based on the product volume. |
general and administrative cost |
The cost of keeping a company running. General and administrative costs are indirect costs and exclude the costs incurred from factory processes central to the creation of a product. |
indirect cost |
Any cost that cannot be traced directly to the making of the final product, but is still necessary for the company to run. |
indirect labor |
The wages of anyone who does not directly contribute to manufacturing a product, but who are still needed to run the factory. |
indirect material |
Any material that is not part of the finished product or used to make the product. Cleaning products are an indirect material cost. |
prime cost |
Direct labor and direct materials combined into one cost. |
product engineering cost |
The cost in time and money to design, build, and test prototypes and final designs of a product. Product engineering cost is usually viewed as an indirect cost. |
product volume |
The number of products being made and sold. |
prototype |
An early model used to complete design evaluation. |
selling cost |
The total cost of marketing, advertising, and selling a product. |
semi-variable cost |
Costs that have a fixed component and a variable component. Both components should be factored into a cost analysis. |
step-variable cost |
Costs that remain fixed for certain amounts of products, but then jump drastically at other amounts. Step-variable costs are named for how they appear when graphed. |
tooling cost |
The cost to buy or build new tools or to revise older tools to make a specific product. This can be a direct or indirect cost, though most companies view it as indirect. |
variable cost |
Costs that change in relation to the product volume. Variable costs may follow a variety of patterns. |