Cours 1 Flashcards
Give a few examples of accounting activities within an organization.
- Prepare and communicate financial statements.
- Manage financial resources.
- Manage transactions.
What is a cost object?
It is anything for which we want to calculate a cost. It is used to:
- Answer a particular need.
- Make a decision.
Give examples of cost objects.
product divisions, department, service rendered, etc.
What is a direct cost?
It is a cost that can be easily and conveniently traced to the particular cost object under consideration.
What is an indirect cost?
It is a cost that cannot be easily and conveniently traced to the particular cost under consideration.
What is a merchandising company?
It is a business that sells goods in the same form in which they are purchased.
What is a manufacturing company?
It is a business that consists of activities and processes that convert raw materials into finished goods.
What is a service company?
It is a business that is different from manufacturing companies in the way that services are immediately consumed by the consumer.
What is a big difference in the balance sheet between services and manufacturing companies?
Services have low to no inventory.
What are the 3 manufacturing costs?
- Direct materials (DM): apples, plastic bottles, etc.
- Direct labor (DL): factory employees that work directly transforming the raw material
- Manufacturing overhead (MOH): machinery depreciation, maintenance, and repair of machinery, maintenance on the plant building, etc.
What are non-manufacturing costs?
Selling and administrative expenses, sales commissions, accountant’s salary, etc.
What is a fixed cost?
- It is a cost that is independent of variations in the activity level.
- Fixed costs decrease per unit as the activity level rises and increase per unit as the activity level falls.
What is the relevant range for fixed costs?
Fixed costs are valid with a specific zone of activity level.
What is a variable cost?
THey are costs that are directly proportional to the activity level.
What is the relevant range for variable costs?
It is the valid assumption within a specific zone of activity level.
What is the total cost?
It is the addition of fixed costs and variable costs. It is the sum of all the resources required in the production of a cost object.
what is the relevant range for the total cost?
It’s a zone in which the volumes are the most likely to be observed in a given period.
What is the average cost?
It is the total cost divided by the number of units produced.
What is an incremental cost?
It is the cost of resources consumed by the last unit produced.
What is the other name for incremental cost?
Marginal cost
What are mixed costs?
They are costs that have both a variable cost component and a fixed cost component. Mixed costs change in total but not proportionally with changes in the activity level.
What are the 2 methods to calculate mixed costs?
-High-low method
- Simple linear regression
What is the high-low method to calculate mixed costs?
This method uses the total costs incurred at the high and low levels of activity. The difference in costs between the high and low levels represents variable costs since only the variable cost component can change as activity levels change.
What is simple linear regression to calculate mixed costs?
It is a more accurate analysis model because it considers all observations.
What is the cost formula?
- Y: total cost
- a: fixed cost
- bx: per-unit variable cost *volume
y=a+bx
