4th lecture Flashcards
Direct costs
Costs that can be easily and accurately identified with a particular cost object. Also called prime costs
Indirect costs
Costs that cannot be easily and accurately identified with a particular cost object. Also called overheads
Manufacturing costs
Costs associated directly with the manufacturing process, also costs that are spent to transform inputs to finished goods (outputs)
Non-manufacturing costs
Costs that are incurred outside the production process
Equilavance coefficient costing
The method is used when the final products have the same material basis, and they are subsequently diversified on the basis of the different amounts of material in the products intended for the market
Marginal cost
An additional cost corresponding to an additional unit of output product. Also expressed as an additional cost
Incremental cost
Total additional cost resulting from a group of additional units of a product
Explicit costs
Also called accounting costs, are regular business costs that appear in company’s financial statements and directly affect its profitability
Implicit costs
Represent the opportunity costs of using resources that firm already owns
Economic profit
Similar to accounting profit but includes implicit costs
Product costs
Part of the costs of goods manufactured: costs are incurred in the manufacturing process either directly or as material or labour costs or indirectly as overheads
Period costs
All costs other than product costs: are not incurred in the manufacturing process and, therefore cannot be assigned to the goods manufactured
