1. Cost Objects, Classification And Behaviour Flashcards
Why do accountants need to know the cost of certain products?
- Value inventory for reporting purposes
- Plan and control activities in organization
- Make decisions to improve profitability
What is the first step in determining cost of an object?
Define specific cost object
What is a cost object?
An activity, unit or phenomenon for which a cost can be accumulated and measured
What could an activity or unit consist of?
Product unit, batch unit, job order, contract or product.
Also customer or geographical region
What would the cost object usually be in a manufacturing organization?
A product
What is a cost classified as when it has been assigned?
- Direct
2. Indirect
Can a direct cost be traced easily?
Yes to a product
What is cost tracing?
Assigning a direct cost to a cost object
Can indirect costs be traced easily to a cost object?
No
What is an example of indirect cost?
Depreciation on a machine used to produce a product
What do indirect costs include?
Low value costs like and screws for a product.
What is assigning indirect costs to a cost object referred to as?
Cost allocation
What are the classifications of costs according to their nature or origins?
- Manufacturing costs
2. Non-manufacturing costs
What is another name for manufacturing costs?
Production costs
Factory costs
What are manufacturing costs?
Total costs incurred during manufacturing process
