l2 : concept of cost

Question 1

define cost.

Answer 1

monetary value of the resources sacrificed to achieve a specific objective

Question 2

define cost object.

Answer 2

anything for which a separate measurement is desired :
- product (a bike)
- service (a flight from mcr to lax)
- project (airplan assembled by airbus for boeing)
- activity (test to determine quality of a car)
- department (resources consumed by marketing dpt)

Question 3

what are the two types of cost when classifying costs in managerial decision making?

Answer 3

relevant costs
irrelevant costs

Question 4

what are the two types of cost when classifying costs in relation to output?

Answer 4

fixed costs
variable costs

Question 5

what are the two types of cost when classifying costs in assignment to a cost object?

Answer 5

direct costs
indirect costs

Question 6

what are the two types of cost when classifying costs in relation to the business function?

Answer 6

manufacturing (raw material, labour)
non-manufacturing (marketing, distribution)

Question 7

what are the two types of cost when classifying costs in relation to financial statements?

Answer 7

product costs
period costs

Question 8

what is the firms assumed objective when making managerial decisions?

Answer 8

to create wealth for shareholders & maximise shareholder wealth