GLOSSARY of Costing & Management Accounting Terms- Alphabet A


Abnormal losses

Unexpected losses arising due to abnormal conditions

Absorption costing

A costing technique whereby all normal costs of running a business, which comprises both fixed and variable costs are charged to the cost unit produced

Actual costs

Historical costs or costs already incurred

Activity based costing (ABC).

This is 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.

Administration costs

Costs incurred in general administration which includes directing and controlling the operations of an organization


This is the process of storing costs in one account and shifting them to other accounts, based on some relevant measure of activity.

Avoidable costs

Costs that can be avoided if decision is made not to produce

Added value

Also known as value added. CIMA defines value added as “ sales value less the cost of purchased materials and services. This represents the worth of an alternative in form, location or availability of a product or service”

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