ch 2 Flashcards
parts of manufacturing costs
direct materials, direct labour, manufacturing overhead
define direct materials
materials that are integral part of finished product
not bought in bulk
only counted if USED during period
define direct labour
labour costs easily traced to individual units (assembly workers, welders)
parts of manufacturing overhead costs
indirect materials
indirect labour
other costs associated with factory operations
define indirect materials
materials that can’t be tracked to specific product (thread, solder, bulk materials)
define indirect labour
costs not directly associated with specific products (janitor, supervisor)
parts of non-manufacturing costs
marketing/selling costs
admin costs
define marketing/selling costs
order getting/fulfilling costs
packing, shipping
define admin costs
general management and support of org:
executive (HR, accounting)
organizational
clerical
how product costs vs period costs used
based on financial accounting
define product/inventoriable/manufacturing cost
DM, DL, Manufacturing overhead
aka COGS
define period costs
cost expenses on income statement in period incurred
(selling and admin costs)
cost classification used on balance sheet
raw materials
WIP
finished goods
define raw materials on a balance sheet
yet to be made into finished product
define work in progress inventory
partially complete product
define finished goods inventory
not yet sold but complete
COGS equation on income statement
beginning finished goods + cost of completed goods - end finished goods
predicting cost behaviour cost classifications:
variable cost
fixed cost
mixed cost
define variable cost
total varies based on changes in activity level
stays constant on per unit basis
define fixed cost
does not change based on activity
only in relevant range
per unit cost lowers with more activity (surface area)
define mixed cost
variable and fixed cost elements
example of variable cost
direct materials
example of fixed cost
rent
example of mixed cost
wages to sale staff
(salary + commission)
explain relevant range
fixed cost stay the same within relevant range
(eventually have to buy a new building to expand, and new relevant range starts)
parts of cost classification for assigning costs to objects
direct cost
indirect cost
define cost object
any you it if analysis for which cost data is wanted (product, customer, job, dept.)
define direct cost
cost easily traced to specific cost object
define indirect cost
cannot be easily traced to cost object
ex. factory manager is associated with many products, not just one)
types of costs in decision making classification
differential cost/revenue
opportunity cost
sunk cost
define differential cost/revenue
difference in rev and exp that may cause loss or gain
define opportunity cost
potential benefit being given up when choose one alt over the other
(work vs school)
define sunk cost
cost already incurred and should not be considered in decision making
