L1 Flashcards
What is cost management used for?
To develop cost and other information to help an org. achieve its strategic goals
Steps in dealing with a problem?
- Determine the strategic issues surrounding the problem
- Identify and analyze alternative actions
- Choose and implement the desired alternatives
What is a cost?
resource to achieve a specific object (production)
Which cost pools are there?
- by type
- by source
- by responsibility
What is a cost driver?
- a variable that causes a change in total cost
cost object?
Any product, service, customer, activity or org. unit to which costs are assigned to
What is cost assignment?
- assigning costs to cost pools or
- assigning costs from cost pools to cost objects
What does the direct/indirect cost classification depend on?
On the choice of the cost object
What are FC?
Total FC do not change in proportion with volume (at least not in the relevant range)
cost function assumptions?
- variations in the level of the cost driver explain the variations in the related total costs
- cost behavior is approx. by a linear cost function within the relevant range
marginal cost and cost function
is the derivative of the total cost function
Costs for internal decision making?
Relevant vs. Irrelevant
Costs for external financial reporting?
Product vs. Period
Costs for estimating costs of products?
Direct vs. Indirect
Costs for understanding cost behavior?
Fixed vs. Variable
