Lecture 2 Flashcards
price - cost = ?
profit
what influences the price of a product?
supply, demand, competition
steps of controlling costs = ?
classify
measure
allocate
does cost = expense?
no
cost = ?
the amount sacrificed to attain something
what’s the difference between costs & expenses?
costs involve the attainment of a long term asset, a one-off purchase
expenses provide short term benefits (e.g., rent expense)
expense = ?
an ongoing payment to function business
cost object = ?
an item being costed (e.g., product, service, process, department, customer)
cost driver = ?
any factor that drives costs (e.g., no. of units produced, direct labour hours, machine hours)
what’s the difference between direct and indirect costs?
direct costs are traceable,
indirect costs aren’t traceable
cost components = ?
raw materials
labour
manufacturing overhead
manufacuting overheads = ?
supporting activities to produce the produce/service
raw materials = ?
raw components to makeup the product
direct/indirect materials
labour = ?
work involved in producing the product or providing the service
direct/indirect labour
direct materials + direct labour + manufacturing overhead = ?
cost of a product
prime cost = ?
direct materials & direct labour
conversion cost = ?
direct labour + manufacturing overhead
difference between product cost & period cost = ?
if the product in inventoriable, product cost
if the product isn’t inventoriable, period cost
product costs = ?
recorded as balance sheet items
period costs = ?
recorded as expenses on income statement
direct material + direct labour + manufacturing overhead = ?
cost of goods/manufactured
opening inventory + cost of production = ?
cost of goods available for sale
cost of goods available for sale - closing inventory = ?
cost of goods sold
process for manufacturing-sector companies?
raw materials
work in progress
finished goods
process for merchandising-sector companies?
sell finished goods
process for service-sector companies?
perishable
work in progress (sometimes)
perishable = ?
services are perishable as they’re consumed
never stored as inventory
what are the two types of cost?
fixed costs
variable costs
variable costs = ?
costs that alter dependent on the level of activity (e.g., cost of sales)
fixed costs = ?
costs that remain constant, regardless of activity level (e.g., rent)
relevant range = ?
the range of activity within which cost behave in a specific and predictable way
are all variable costs direct?
no
are all fixed costs indirect?
no
total costs = ?
total direct materials + total direct labour + manufacturing overhead
unit cost = ?
total manufacturing costs / number of units manufactured
what is the difference between relevant & irrelevant costs?
relevant costs are impacted by future decisions
indirect costs aren’t impacted by future decisions
sunk costs = ?
costs of resources already acquired and are unaffected by the choice between the various alternatives (e.g., depreciation)
real but irrelevant
opportunity costs = ?
cost that measures the opportunity that is lost or sacrificed when the choice of a course of action requires an alternative to be sacrificed
not real, but relevant
are irrelevant costs avoidable?
no, they’re unavoidable
are relevant costs avoidable?
yes
costing system two steps = ?
accumulates costs
assigns costs to particular objects
cost accumulation = ?
the collection of data in an organised way through an accounting system
cost assignment = ?
encompasses tracing and allocating costs to an object
