372 ACCOUNTING FOR MANAGERS
Cost A resource sacrificed or forgone to achieve a
specific objective (Horngrenet al.), defined
typically in monetary terms.
Cost behaviour The idea that fixed costs and variable costs react
differently to changes in the volume of
products/services produced.
Cost centre A division or unit of an organization that is
responsible for controlling costs.
Cost control The process of either reducing costs while
maintaining the same level of productivity or
maintaining costs while increasing productivity.
Cost driver The most significant cause of the cost of an
activity, a measure of the demand for an activity
by each product/service enabling the cost of
activities to be assigned from cost pools to
products/services.
Cost object Anything for which a measurement of cost is
required – inputs, processes, outputs or
responsibility centres.
Cost of capital The costs incurred by an organization to fund all
its investments, comprising the risk-adjusted
cost of equity and debt weighted by the mix of
equity and debt.
Cost of goods sold See cost of sales.
Cost of manufacture The cost of goods manufactured for subsequent
sale.
Cost of quality The difference between the actual costs of
production, selling and service and the costs that
would be incurred if there were no failures
during production or usage of products or
services.
Cost of sales The manufacture or purchase price of goods sold
in a period or the cost of providing a service.
Cost-plus pricing A method of pricing in which a mark-up is
added to the total product/service cost.
Cost pool The costs of (cross-functional) business
processes, irrespective of the organizational
structure of the business.
Cost – volume – profit
analysis (CVP)
A method for understanding the relationship
between revenue, cost and sales volume.
Credit Buying or selling goods or services now with the
intention of payment following at some time in
the future (as opposed to buying or selling
goods or services for cash).