Cost Identification and Behaviour Flashcards
Cost Definition
Historical cost Cost unit Cost Centre Cost Object Composite Cost Unit
Cost Unit
A unit of product or service in relation to which costs are ascertained i.e. Electricity Mega Watt per hour
Composite Cost Unit
Made up of two or more parts
Cost Centre
Collecting place for costs
Cost object
Anything for which costs can be ascertained
Classification of costs
Can be done on;
Nature
Purpose
Behaviour
Classification of Costs According to their Nature
Grouping costs into whether they are ;
Materials
Labour
Expense
Classification of Costs According to their Purpose
Direct costs;
i.e. Table - timber, screws
Indirect costs;
Rent, power, labour
Prime Costs
The total of all direct costs
Cost Behaviour
Fixed
Variable
Semi Variable
Fixed Cost
Does not vary with the level of output
Stepped Fixed Costs
I.e. Rent
If the activity is expanded beyond the relevant range to the point where new premises are required then the rent cost will increase
Variable Cost
Varies with the level of output
Semi Variable Cost
Has elements of fixed and variable costs i.e. Telephone, electricity
Semi Variable Cost Formula
total fixed cost + total variable cost
