Cost Identification & Classifcation Flashcards
A cost unit…
Is a unit of product/service for which costs are ascertained.
A composite cost unit…
Usually used in the service industry and consists of two or more parts.
A cost centre…
Is a production/service location, a function, an activity or an item of equipment for which costs are accumulated.
Cost centres and cost units are both…
Cost objects.
Costs can be classified by…
Nature - Direct, Indirect
Element - Labour, Material, Expenses
Function - Production, Non-production
Behaviour - Fixed, Variable, Semi-variable, Stepped
Prime cost…
Is the total of all the direct costs (Labour, Material, expenses).
Direct costs…
Can be directly attributed to a particular cost object.
Indirect costs…
Cannot be directly attributed to a particular cost object.
Total production cost…
Is the sum of the prime cost and the indirect costs.
Total (full) cost…
Is the sum of the total production cost and the non-production overheads.
Relevant costs and revenues…
are the costs and revenues that change as a direct result of a decision taken.
Relevant costs and revenues have the following features…
Cash flows
Incremental
Future
Fixed costs…
Are incurred for a particular accounting period and are unaffected bu fluctuations in the level of activity.
Variable costs…
Vary with the level of activity.
Non-relevant costs and revenues…
Are not relevant to a particular decision.
