Lecture One Flashcards
Direct cost
Costs that can be easily and conveniently traced to a unit of product or other cost
Examples of direct costs
Direct material and direct labor
Indirect costs
Costs that cannot be easily and conveniently traced to a unit of product or other cost
object.
Examples of indirect costs
Manufacturing overhead
Classifications of manufacturing costs
Direct material, direct labor, manufacturing overhead
To the product
Direct materials
Raw materials that become an integral part of the product and that can be conveniently traced directly.
Example of direct materials
A radio installed in a automobile
Direct labor
Those labor costs that can be easily traced to individual units of product. Example: wages paid to automobile assembly workers
Manufacturing overhead
Manufacturing costs that cannot be easily traced directly to specific units produced.
Examples of manufacturing overhead
indirect materials (Materials used to support the production process, lubricants and cleaning supplies used in the automobile assembly plant) and indirect labor (wages paid to employees who are not directly involved in production work, maintenance workers, janitors and security guards).
Non manufacturing costs
Selling costs, administrative costs
Selling costs
costs necessary to secure the order and deliver the product. Selling costs can be either direct or indirect costs.
Administrative costs
All executive, organizational, and electrical costs. Administrative costs can be either direct or indirect costs.
Cost classifications for predicting cost behavior
Cost behavior refers to how a cost will react to changes in the level of activity. The most common classifications are:
- Variable costs
- Fixed costs
- Mixed costs
Variable costs
A cost that varies, in total, in direct proportion to changes in the level of activity. Your total texting bill may be based on how many texts you send.
