Chapter 1 Flashcards
What are Product Costs?
Also Inventoriable or Total Manufacturing Costs are the sum of DL, DM and OH
What are Period Costs?
All other Costs that ca not be traced back to a product directly or indirectly Example: S&A Expenses
What are Prime and Conversion Costs
Prime Cost = Direct Material + Direct Labour
Represents the direct costs of manufacturing, which are easily traceable to the product
Conversion Cost = Direct labour + Manufacturing Overhead
Represents the cost of converting raw materials into finished products
Cost of Goods Manufactured COGM?
= Beginning Inventory Work in Process + Direct Material + Direct Labor + Total Manufacturing Overhead - Ending Inventory Work in Process
Direct Material?
=Raw Material Beginning + Raw Material Purchased - Raw Material End
Difference Direct and Indirect
Direct Costs: can be directly traced to the production of a specific good or service
Indirect Costs: cannot be traced directly to a single product or service. Instead, they are shared across multiple products or services
Difference VC and FC
Variable/Fixed: fixed costs stay constant, and variable costs fluctuate based on activity levels
Opportunity costs?
potential benefit that is given up when one alternative is selected over another
Out-of-pocket costs?
A cost that requires a cash outlay (an amount of money that you spend on something)
Sunk costs?
All costs incurred in the past that cannot be changed by any decision made now or in the future, should not be considered in decisions
Differential Costs?
Net difference in cost between two alternative courses of action
Marginal Costs?
Additional cost needed to produce an additional product; not simply variable costs
Average Costs?
Cost per Unit => Total Costs divided by total units
