Chapter 2 Flashcards
Cost
Sacrifice of resource to achieve objective.
COST OBJECT
Anything for which a separate cost measurement is required.
COST ACCUMULATION
collection (accumulation) of actual cost data in an organized way
COST ASSIGNMENT
Assigns cost pool to cost object
Direct cost
Cost that can be directly traced to the cost object
Indirect cost
Cost that cannot be directly traced to the cost object
Cost tracing
Assigning direct costs to cost object
Cost allocation
Assigning indirect costs to cost assignment
COST DRIVER, AKA COST GENERATOR, COST DETERMINANT
Factor that affects costs over time period
COST MANAGEMENT
Trying to reduce costs while satisfying customers
Prime costs
Direct manufacturing costs
CONVERSION COSTS
Costs of converting raw materials to finished goods
Variable costs
Cost per unit, which does not change, regardless of the sales volume
Fixed costs
Costs that remain the same in total, constant over relevant range
TOTAL COSTS
Sum of variable costs and fixed costs
RELEVANT RANGE
Range of activity expected
SERVICE - SECTOR COMPANIES
provide services or intangible products
MERCHANDISING - SECTOR COMPANIES
purchase and resell tangible
products without changing the form of the product
MANUFACTURING - SECTOR COMPANIES
purchase raw materials and other components, and convert them to finished goods
Capitalized costs
First recorded as assets, later expensed.
CAPITALIZED INVENTORIABLE COSTS
Recorded as asset until sold then turns into costs of goods sold
DIRECT MATERIALS (DM)
Materials directly associated with cost object
Direct labour (DL)
Labour costs directly traced to cost object
Indirect manufacturing costs (overhead)
Manufacturing costs that can not be directly traced to cost object
