Cost Accounting 1 Flashcards
What is the difference between Variable cost and a fix cost?
Variable cost flxuate when productiction and sales volume change. They go up when production level increase and drop down when production level decrease.
Example of variable cost include:
Sales commission/ direct labor cost/raw materials expenses
Fixed cost remain constant regardless of a company product volume.
Example include: insurance, interest cost and depreciation
What are three reason to keep track of cost?
P I E
Product cost - (inventory and COGS)
Income Determination- profit
Efficiently (comparison to industry)
What are prime cost ?
Direct materials + direct labor
What are conversion cost ?
Direct labor and and factory Overhead applied
Where does product costs go on a financial statement?
Product cost are not expense until they are sold. There are consider assets since they have not been identified as COGS yet. There are inventory-able on the balance sheet
What are the components of product cost ?
Direct Materials
Direct Labor (touch labor)
Manufacturing Overhead (applied)
What are period cost?
Selling and general and administrative expenses. There are not inventoryable and do not directly effect the product produce. They go on a income statement.
Think the office in a factory and the warehouse
What are manufacturing cost?
Product cost that are capitalized to the cost of the manufactured product
What are Non manufacturing cost ?
Period cost, cost that do not relate to the manufacturing of a product.
Example - SG&A and etc
What are direct cost?
When you can easily trace it to the product direct production.
Example Includes:
Direct Materials
Direct Labor
Freight in
Normal scrap of materials
What Indirect cost ?
Cost that are easily traced to the direct production of a product.
These include:
Indirect materials - cleaning supplies
Indirect labor - office building workers /janitors/ engineer and HR
Other direct cost: rent ,insurance, property tax
How do you estimate overhead ?
Use cost drivers. Cost drives use overhead allocation.
They assign (estimate) factory overhead during period and allocate to individual products.
What is the difference between Traditional costing and activity base costing?
Traditional costing uses all indirect cost allocated to a single “overhead” or pool cost.
Activity-based costing uses multiple cost drivers and pools.
How do you calculate traditional costing?
Traditional costing is the allocation of factory overhead to products based on the volume of production resources consumed. Under this method, overhead is usually applied based on either the amount of direct labor hours consumed or machine hours used
How do you calculate total variable cost?
Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this:
Total Variable Costs =
Cost Per Unit x Total Number of Units.
