Cost Accounting Flashcards
Define indirect costs with examples.
Not so easily traced to product or service. Not incorporated in the product. Eg. Salary of factory manager Local gov taxes Paint used for doll house Insurance of premises Oil used for machinery maintenance
Define a direct cost with examples.
Traces to product or service. Direct materials and labour. Eg. Raw materials used in making gold rings. Wages of a mechanic. Parts and supplies. Costs of bottles in wine making Paint cost of car.
Define fixed cost with examples
Don't change when level of activity changes. Depreciation of factory machinery Office supervisors salary Rent of shop Delivery vehicle insurance
Difference between fixed variable and mixed cost
Fixed- do not change when level of activity does.
Variable- do change when level of activity does
Mixed- contain both fixed and variable elements.
Explain Manufacturing costs
Direct material direct labour and manufacturing overhead.
Define direct materials
Raw materials that go into making of product.
Eg fabric, buttons.
Explain manufacturing overhead
Represent cost that are not direct materials or direct labour, but still go towards the manufacturing process.
Examples of manufacturing overhead
Electricity Depreciation Insurance Maintenance Repairs to equipment
What are non manufacturing costs?
Don’t go towards manufacturing.
Eg marketing costs, distribution, transport costs, admin.
Period costs are …
Expenses which has no future economic benefit to business. Eg advertising Wages Office rent Insurance
Difference between product cost and period cost
Product cost- merchandise Acquired or manufactured or service.
Period cost- not product costs therefore shown as expenses km income statement.
What is cost accounting ?
Is the measuring, analysing, recording and reporting on the cost of a product or service.
What is normal costing?
The system that calculates the cost of a product or service using the actual direct materials, labour and predetermined overhead rate.
What is standard costing?
A system of product costing where the cost of a product is based on standard costs for direct materials, labour and manufacturing overheads.
Define variable cost with examples
Cost changes as the level activity changes.
Eg cost of materials
Commissions paid to salesmen
Cost of extra hours
