Chapter 2,6,7 Flashcards
Cost of Good Sold
The expense measured by the cost of the finished goods sold during a period of time
Product Cost
Cost assigned to goods that were either purchased or manufactured for resale. It is used to value inventory of manufactured goods or merchandise until goods are sold
Period Cost
All costs that are not product costs. Utilities, salaries, advertising, promotions are examples. It has no future value and is reported on the balance sheet.
Operating Expense
The costs of producing services
Work In Process
Manufactured products that are only partially completed at the date the balance sheet is prepared. It is a product cost that has a future value
Manufacturing costs
Direct material, direct labor, and manufacturing overhead
Conversion costs
Costs of converting raw materials to finished goods. Direct labor and overhead are examples
Cost Drivers
Activities that cause costs to to e incurred
Variable cost
Changes in total in proportion to level of activity. Unit variable cost remains the same as activity level changes
Fixed costs
Total fixed cost remains unchanged as activity level increases or decreases. Unit fixed cost changes in changes as the activity level changes
Opportunity cost
Benefit that is sacrificed when the choice f one action precludes taking an alternative course of action
Sunk costs
Costs that have been incurred in the past that die not affect future costs and cannot be changed by any current or future action
Marginal cost
The extra cost incurred when one additional unit is produced.
Averse cost per unit
Total cost of quantity manufactured divided by number of units manufactured.
Semi variable cost
Has a fixed and variable component. Rental truck fixed cost is $300 but variable cost are gasoline, oil, and tires
High Low Method
First, pick the highest and lowest cost. It is the difference between the COST corresponding to the highest and lowest activity levels DIVIDED by T&E difference between the highest and lowest activity
Total contribution margin
Amount of revenue that is available to pay fixed expenses after all variable expenses have been paid
Unit contribution margin
The amount that remains after variable expenses have been covered
Cost of Goods Manufactured
Direct materials (beginning raw materials plus purchased raw material - ending raw material) \+ Direct labor \+ Manufacturing overhead = TOTAL MANUFACTURING COSTS \+ Beginning work in process - Ending work in process = cost I Good Manufactured
Unit variable cost
Total cost divided by total units
Classified income statement
Sales - variable expenses = contribution margin - fixed cost = operating income
