Cost Terms Flashcards
Direct Material
Integral part of product & is easily returned to product
Example
Direct Material
Raw Material
Indirect material
Used to support production process
Direct Labour
Easily traced back to individual units of product
Example
Direct Labour
Salary of factory employee
Indirect Labour
Wages paid to employees NOT directly involved in production
Example
Indirect Labour
Salary of factory supervisor
Period cost
Not included in Product Cost
Written off in Income Statement
Product Cost
Includes Direct Material, Direct Labour & Manufacturing Overhaeds
Fixed Cost
Remain unchanged when activity changes
Examples
Fixed Cost
- Monhtly rent
- Advertisement
- Depreciation
Variable Cost
Changes when activity changes
Examples
Variable cost
- Total material cost
- Salary & Wages
- Water & Electricity
Direct Cost
Easily & conveniently routed to unit of product
Examples
Direct Cost
- Direct Material
- Direct Labour
Indirect Cost
CANNOT be easily passed on a unit of product
Examples
Indirect Cost
- Rent
- Depreciation
- Water & Electricity
Conversion Cost
Sum of all DL & Factory OH
Converting cost of RM -> Finished products
Definition
Relevant range
Future costs & revenue changed by decision
Definition
Cost object
Any activity that requires seperate measure of costs
Definition
High-Low
Analysing cost behaviours consisting of selected periods that have highest/lowest activity levels
&
Comparing changes in costs that arise to seperate FC & VC
Characteristic
High-Low
- Less accurate
- Only uses 2 points in data series
VC per unit
High-Low
(highest - lowest cost) / (highest - lowest activity/units)
FC
High-Low
Total cost at LOWEST activity - Total variable cost (number of units at lowest activity x above variable cost/unit answer)
