Cost types Flashcards
Fixed Cost
fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. Does not change when activity changes
Variable Cost
Variable costs are costs that change in proportion to the good or service that a business produces.
Avoidable Cost
An expense that will not be incurred if a particular activity is not performed. Avoidable cost refers to variable costs that can be avoided, unlike most fixed costs, which are typically unavoidable.While avoidable costs are often viewed as negative costs, they may be necessary to achieve certain goals or thresholds.
Differential Cost
Differential cost is the difference between the cost of two alternative decisions, or of a change in output levels. The concept is used to reach decisions about which alternatives to pursue, and which to drop.
Relevant Cost
A relevant cost (also called avoidable cost or differential cost)[1] is a cost that differs between alternatives in a particular decision.
Oppertunity Cost
opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. Assuming the best choice is made, it is the “cost” incurred by not enjoying the benefit that would be had by taking the second best choice available
Direct Cost
A direct cost can easily and coventiently be traced to the particular cost object under consideration
Cost Bbject
A cost object is anything for which cost data are desired - including products, product lines, customers, jobs and organizational subunits.
Indirect cost
An cost that cannot esily and conveniently be traced to the particular cost object under consideration
Common cost
Common cost is common to a number of costing objects but cannot be traced to them individually.
Incremental Cost
Opposite of decremental cost ->Differential cost is the difference between the cost of two alternative decisions, or of a change in output levels. If is is an increase it is called incremental cost.
Manufacturing overhhead
Include all costs of manfacturing except direct materials and direct labour. Include things like: Heat, light, property taxes, insurane etc.
Conversion cost
Manufacturing overhead + direct labour.
Prime cost
Direct labour with direct materials.
Product cost
Product costs include all the costs that are involved in acquiring or making a product.
Period cost
period cost are all cost not included in product cost. Ex, sales commissions and office rent.
Cost behaviour
Means how a cost will react or respond to changes in the level of business activity.
Fixed cost committed
Long term, cannot be reduced in short term - Ex. Drepreciation on buildings and equipment
Fixed cost discretionary
May be altered in the short-term by current managerial decisions - ex. advertising, research and development.
Administrative Cost
All executive, organizational and clerical costs associated with general management of an organization rather than with manufacturing marketing or selling.
Appraisal costs (not part of curriculum)
Cost that are incurred to identify defective products before the products are shipped to cusomers. (not part of curriculum)
Common fixed cost
A fixed cost that support more than one business segment, but is not traceable in whole or in part to one of the business segments.
Curvilinear costs
A relationship between cost and activity that is a curve rather a straight line. (The fact that Volume and cost is not linear, but madeup linear by accountants to easier understand the connection)
Discretionary fixed cost
Those fixed costs that arise from annual decision by management to spend in certain fixed cost areas, such as advertising and research. Ex. Advertising, research, public relations, internships for students etc.
Full cost (approach)
Same as absorption costing
Joint product costs
Costs that are incurred up to(before) the split-off point in producing joint products
Kaizen costing
The reduction of cost during production through continuous improvements that reduce waste and increase efficientcy
Life-cycling costing
Analyses costs incurred throughout the life of a product from development through to full production
Mixed cost
A cost that both contain fixed- and variable cost.
Quality costs
Cost that are incurred to prevent defective products from falling into the hands of customers or that are incurred as a result of defective units.
Step-variable cost
A cost (such as the cost of a maintenance worker) that is obtainable only in large chunks and that increases and decreases only in response to fairly wide changes in the activity level.
Stock-related cost
Synonym for product costs
Sunk Cost
Any cost that has already been incurred and that cannot be changed by any decision made now or in the future.
Traceable fixed cost
A fixed cost that is incurred because of the existence of a particular business segment.
Transferred-in cost
The cost attached to products that have been received from a prior processing deparment.
Variable costing
A costing method that includes only variable manufacturing cost, direct materials, direct labour and variable manufacturing overhead in the cost of a unit of products. (also known as marginal costing or direct costing)
