Costs Flashcards
Prime
Direct materials
+
Direct labour
Conversion
Direct labour
+
Manufacturing overhead
Product
All costs involved in making a product
Include: direct materials, direct labour, manufacturing Overhead
Inventoriable cost
Product costs
Period
All costs that are NOT included in product costs
Include: advertising, executive salaries, sales, commission, selling&admin
Total variable cost
Total variable cost changes as activity level changes
Total fixed cost
Total fixed cost remains the Same even when the activity level changes
Variable cost per unit
Remains the same over wide ranges of activity
Remains constant per unit
Fixed cost per unit
Goes down as the activity level goes up
Opportunity costs
Cost you’ve used is lost by choosing that money option=university
The potential benefit is given up when one alternative is selected over another
Sunk
Cannot be changed by any decision
When spending money that money is now gone whatever you do with it
eg a car
Committed fixed costs
Relates to investment in facilities,equipment & the basic organisational structure of a firm
-depreciation on buildings and equipment
Discretionary fixed cost
Arise from annual decisions by management to spend in certain fixed costs areas
-advertising&research and development
Process costing
A single, homogeneous product/service is produced
-industries in which process costing is used include cement, flour, brick, oil refining
