Intro And Cost Classification Flashcards
What is the overall aim of the module BS2214?
Develop and explain the principles involved in designing and evaluating management and cost accounting information systems
What are the three ways of constructing management accounting information?
- Cost accounting with emphasis on product costs
- Calculation of decision-relevant costs
- Responsibility accounting and performance measurement
What is the goal of management accounting?
To accumulate, classify, summarize and report information to assist managers in decision-making, planning, control, and performance measurement
What is the goal of a cost accounting system?
To calculate the cost of making or doing something and meet internal monthly or quarterly profit measurement requirements
Who are considered stakeholders in management accounting?
Individuals or groups that have an interest in the financial position and performance of the organization
What is sustainability accounting?
Reporting of non-financial information focusing on the social and environmental impacts and performance of a business
How can management accountants impact sustainability accounting?
- Strategic planning
- Financial analysis
- Risk management
- Technology solutions
- Activity analysis
- Capital budgeting
What are the objectives of Part 2 of the session on cost classification?
- Distinguish between two different cost classification schemes
- Classify costs for inventory valuation
- Classify costs for decision making and planning & control
What are the two classifications of costs in cost accounting?
- Direct costs
- Indirect costs
Define prime costs.
Direct costs that are directly attributable to the production of goods
What are period costs?
Expenses necessary to keep the business operating but not linked to the production process
What is a cost summary?
A statement showing the various components of total cost for a product, including previous or budgeted data for comparison
What is the difference between variable costs and fixed costs?
- Variable costs change with the level of activity
- Fixed costs remain constant over wide ranges of activity
What are relevant costs?
Costs that will change as a result of a decision
What are sunk costs?
Costs that have already been incurred and cannot be changed by any future decision
What is an opportunity cost?
The potential benefit lost when one alternative is chosen over another
Fill in the blank: The _______ costs can be saved by not adopting an alternative.
[avoidable]
True or False: Sunk costs are always relevant for future decision-making.
False
What is incremental cost?
The additional cost incurred from a decision or action
What is the importance of understanding cost behavior?
It is crucial for decision-making regarding production and resource allocation
What are the categories of costs for decision making?
- Cost and revenue behavior
- Relevant and irrelevant costs
- Avoidable and unavoidable costs
- Sunk costs
- Opportunity costs
- Incremental costs
