Lecture 1 - Cost basics

Question 1

What is a cost object?

Answer 1

Any activity for which cost information is required

Question 2

What are direct costs?

Answer 2

Costs that can be directly traced to a cost object (e.g. Materials for manufacturing)

Question 3

What are indirect costs?

Answer 3

Costs which cannot be specifically or directly allocated to a cost object (E.g. Salary of the manufacturing plant’s supervisor)

Question 4

What is a cost driver?

Answer 4

Any factor which causes a change in the cost of an activity

Question 5

What is a semi-variable cost?

Answer 5

A cost containing both fixed and variable properties, (E.g. Gas or electricity)

Question 6

What is a stepped fixed cost?

Answer 6

The costs are constant for a specific range, but when they reach a critical level the costs increase to the next step (E.g. Equipment rental)