Chapter 1 Flashcards
Cost object
anything for which cost data are desired ie: specific patient, products, customers,etc.
direct cost
cost easily traced to its cost object ie: cost of paper needed to make 200 brochures would be direct cost of the customer
indirect
cost cannot easily be traced to cost object ie” factory managers salary for chicken noodle soup.
common cost
no traceable cost object ie: no part of pilots wage is determined by passenger
raw materials
materials that go into final product
direct materials
play special part in final product and costs can be traced ie” electrical components in Samsung cell phones
direct labor
labor costs easily traced back to individual units of product ie” assembly line workers
prime costs
direct materials cost + direct labor cost
manufacturing overhead
all manufacturing costs besides direct materials and direct labor
indirect materials
smaller elements that play an integral role in final product but cannot be traced to individual unit of product ie: nails & screws
indirect labor
labor of janitors, custodians, handlers that played a part but cannot be traced to an individual product.
conversion cost
direct labor+ manufacturing overhead
selling costs
all costs incurred to secure order and to get product into hands of customer.
administrative costs
executive, organizational, and clerical costs associated with general management instead of manufacturing and selling.
product costs
costs involved in acquiring or making a product. consists of direct materials direct labor manufacturing overhead, recorded as expenses in period of goods sold
work in progress
products only partially complete
finished goods
complete products that have not been sold yet
period costs
costs taken directly to the income statement as expenses in the period in which they are incurred or accrued
variable cost
varies in total in direct proportion of changes in level of activity, constant per unit
activity base
whatever causes a variable cost
fixed cost
remains constant regardless of changes
committed fixed costs
investments in facilities and basic organizational structure
discretionary fixed costs
fixed costs that arrive from annual decisions by management
relevant range
range of activity within which assumptions about variable and fixed costs behavior are valid
differential cost
future cost that differs between 2 alternatives
differential revenue
future revenue between 2 alternatives
incremental cost
increase in cost between 2 alternatives
opportunity cost
potential benefit given up when selecting one alternative over the other
sunk cost
already incurred cannot be undone
