Cost , concept and behaviour Flashcards
Week 2
A cost classification
grouping together costs which share the same attributes related to a cost objective
A cost objective
an activity which a separate measurement of costs is required
Manufacturing overhead
indirect costs like indirect labour and indirect materials
prime cost
direct materials + direct labour
conversion cost
resources employed in transforming direct materials into a finished product
direct labour + manufacturing overhead
product cost
cost incurred in the making of the product, e.g. direct materials, direct labour and manufacturing overhead
period cost
all other costs, like marketing, administrative etc
inventory is
an asset, so do not include non-manufacturing costs because they havent been incurred yet
the profit statement
cost of good sold (beginning merchandise inventory) + purchases:
goods available for sales
- ending merchandise inventory
= cost of goods sold
manufacturing cost flows
material purchases> raw materials
direct labour and manufacturing overhead> work in progress
finished goods> cost of goods sold
selling and administrative (period cost)> selling and administrative
stock flows
beginning balance + additions= available - withdrawals= ending balance
variable cost per unit
cost per minute
the activity base
units produced, labour hours, machine hours, miles driven (use this to classify costs as fixed or variable)
fixed cost per unit
average cost per call etc
relevant range
the volume range within which actual operations are likely to occur
e.g. limit to fixed costs remaining, like them having a max and then they need to produce more
