Ch 2 an intro to cost terms and purposes Flashcards
LO
1 identify and distinguish between two manufacturing cost classification systems: direct and indirect, prime and conversion
2 differentiate fixed from variable cost behavior, and explain the relationship of cost behavior to direct and indirect cost classifications
3 interpret unitized fixed costs appropriately when making cost management decisions
4 apply cost info to produce a IFRS/ASPE compliant stmt of comprehensive income showing proper cost of goods sold and a stmt of financial position showing proper inventory valuation
5 explain cost identification, classification, and management systems and their use within the decision framework
cost
a resource sacrificed or forgone to achieve a specific objective
actual cost
the cost incurred (a historical or past cost)
budgeted cost
predicted or forecasted cost (a future cost)
cost accumulation
the collection of actual cost data in an organized way
cost pools
accumulated costs
cost assignment
links a pool of actual costs to a distinct cost object
direct costs
related to the distinct cost object and can be traced to it
indirect costs
cannot be traced to a specific cost object in a cost-effective way because the benefits from use of the resources are shared among diverse cost objects
factors affecting direct/indirect cost classifications
- selection of the distinct cost object
- the materiality or significance of the cost in question
- available info-gathering technology
- design of operations
prime costs
direct manufacturing costs
conversion costs
all manufacturing costs other than direct materials costs required to convert direct materials into finished goods
cost driver
a variable, such as the level of activity or volume, that casually affects costs over a given time span
3 types of inventory
- DM
- WIP
- FG
steps in the flow of inventoriable costs:
- cost of direct materials used
- total manufacturing costs incurred
- cost of goods manufactured
- COGS
