CH 2 Cost Terms and Purposes Flashcards
What are Costs?
sacrificed resource to achieve a specific objective
What are Budgeted Costs?
a predicted cost
What are Actual Costs?
a cost that has occured
What are Cost Object?
anything of interest for which a cost is desired
Examples Cost Objects
Product, Services, Project
What is Cost accumulation?
a collection of cost data in an organized manner
Cost assignment
includes gathering accumulated costs to a cost object
Tracing and allocating of accumulated costs.
Direct Costs
can conveniently and economically traced back to a cost objective
Indirect Costs
can NOT conveniently and economically traced back to a cost objective. This costs are allocated in a rational and systematic manner.
Direct Costs (Examples)
parts, wages of workers in an assembly line
Indirect Costs (Examples)
Electricity, Rent, Property taxes
Variable Costs
change in total proportion to the changes in the related level of activity or volume.
Fixed Costs
remain unchanged regardless of output level changes.
Cost dirver
a variable that causally affects costs over a given time span
relevant range
the band of normal activity level (or volume) in which there is a specific relationship between the level of activity and given cost
Problem with unit costs
change with different level of output or volume
Types of firmes, and what they do
Manufacturing (purchase materials and components and convert them in products)
Merchandising (purchase and sell tangible products without chaining their form)
Service firms
Types of Manufacturing Inventories
Direct Materials (resources on stock and available for use) Work in progress (product started and not completed) Finished goods (products ready for sale)
Types of Product costs (3)
Direct materials (costs of buying of all materials needed)
Direct labor (Costs of all manufacturing labor traced to object)
Indirect Manufacturing costs (costs not traceable to a object)
Inventoriable Costs
Inventoriable costs are capitalized as inventory until the good is sold, then they are transferred to Costs of goods sold.
Period Costs
have no future value and are expressed for the period incurred
3 main features of cost accounting and cost management
- Calculating the cost of products, services
- Obtaining information for planning and control
- Analyzing the relevant information for decision marking
