Week 2, Topic 1: Nature and Behaviour of costs

Question 1

How do we define Cost? -

Answer 1

McLaney & Atrill 2018 - ‘the amount sacrificed to achieve a particular business objective’

Question 2

A further explanation of costs - Drury 2009

Answer 2

1- Inventory valuation for internal and external profit measurment

2- provide relevant informaiton to help manager make better decisions

3- Provide information for planning, control and performance measurement

Question 3

Fixed Costs-

Answer 3

remain constant when changes occur to the volume of activity

Question 4

Variable costs-

Answer 4

vary according to the volume of activity

Question 5

Direct costs -

Answer 5

expenses that directly go into producing goods or providing services eg:

• direct labor
• direct materials
• manufacturing supplies

Question 6

Indirect costs -

Answer 6

general expenses that keep you operating

• rent
• utilities
• general office expenses