Classification of Costs Flashcards
a cost is a…
sacrifice of an economic resource
three ways to typically account for costs
- expense in current cost period it is incurred on the income statement
- include cost in inventory until sold, then expense on IS
- report on BS as an asset then expense when as it is used to produce revs
when do you report cost on BS as an asset and then report on IS as an asset as it creates revenue for the company?
PP&E, intangible assets
all costs that provide ________ are expensed as incurred
no future economic benefit
all costs that provide ______ are reported as an asset until the asset is used up
future economic benefit
product costs include…
all costs required to make products for sale to customers (inventory)
do product costs provide future economic benefit?
yes
Cost of inventory sold is reported as an…
asset until until it is sold
period costs are…
costs required to support the operations of a business
do period costs provide future economic benefits?
no
period costs are reported as an…
expense in period incurred
the cost to make products that were sold are…
product costs
costs incurred during the period in order to support the revenure generated process are…
period costs
revenues associated with units sold is matched to…
cost of units sold
the matching principle requires…
all expenses be reported in the same period as revenue generated
managerial accountants do not tytpically analyze what accounts?
under operating income
product costs include what three aspects?
- direct labor
- direct material
- MOH
all three costs included in inventory become what on the IS?
cost of goods sold
period costs are _______ to make the product
not required
examples of period costs
exec salaries, admin salaries, admin expenses, sales commision, advertising, research, warehouse, employees who move inventory,
legal expenses
direct costs are costs that…
costs that can easily be traced to one product
direct costs are _____, ______, and _____, that can be…
direct labor, direct materials, and period costs incurred as a %of sales
period costs are considered direct costs if…
they are incurred as a % of sales
indirect costs are costs that…
cannot be easily traced to one product
indirect costs are incurred to…
support the manufacturing of ALL PRODUCTS
indirect costs typically include…
MOH and most period costs
what costs are related to MANUFACTURING?
product costs
examples of product costs
materials, cost of workers who make the product, the costs of facility and management required to make the product
direct labor is…
workers that touch the product to make it or operate a machine that makes a product
managers and supervisors are considered ___ labor
indirect
MOH includes…
all costs incurred at the manufacturing facility to make the product that are not included in DM or DL
MOH primarily consists of…
cost of using the facility and the cost of managing the production process
the cost of using the facility and the cost of managing the production process are…
MOH
for a cost to be considered a MOH, it MUST…
be incurred at the manufacturing facility
