Lecture 10. Cost Estimating Flashcards
What are costs?
Amount of money for goods/services to bring a current or future cash flow to the organisation.
What are costs in accounting?
Costs are used up in production or expire, costs that have expired are called expenses.
What can product costs be split into?
Direct and indirect costs.
What are indirect costs called?
Overhead
What is a fixed cost?
Doesn’t increase or decrease when output varies.
What is a variable cost?
Increases or decreases with output.
What is a mixed cost?
Has a variable and fixed component.
What is financial accounting?
To produce a financial statement that conveys information to outside parties.
What is management accounting?
Providing information useful for the operation of the company.
What is cost accounting?
Technical process by which expenses are allocated to products.
What is an expenditure?
Amount of money paid for an asset or service.
What is the accounting period?
A major constraint in cost measurement. (?)
Functions carried out must be accomplished during a given period.
What are expenses?
The amount of money used during a given year (the accounting period).
Most difficult is measuring the expenses.
Not all expenditures are expenses, what arent?
Long lived assets, called depreciation.
What are the three costing methods?
- Process costing.
- Job-order costing.
- Activity-based costing.
What is process costing?
Assign average costs to each unit of production.
What is job-order costing?
Differentiates the (direct) costs per job (or service) to see how profitable each job is.
What is activity-based costing?
Calculates what percentage of overhead should be assigned to a job.
What is precision?
How accurate the cost information is.
- no physical measurement therefore no high accuracy per task (5% is 3 min/hour)
- dont expect accuracy better than 5%
