Week 5 - More Cost Definitions Flashcards
In financial accounting, what is a cost?
A measure of resources used or given up to achieve a stated purpose
In management accounting, what are costs?
Product costs are the costs a company assigns to units produced
Define direct materials
Those materials that become an integral part of the product and that can be conveniently traced directly to it
Define direct labour
Those labour costs that can easily be traced to individual units of product
What is indirect labour?
Wages that will be paid to employees who are not directly involved in production work e.g supervisors
What are indirect materials?
Materials used to support the production process e.g cleaning supplies
What two things make up manufacturing overheard?
Indirect labour and indirect materials
What are total costs made up of?
Direct and indirect costs
What do you get if you combine direct materials and direct labour?
Prime cost
What do you get if you combine direct labour and manufacturing overheard?
Conversion cost
What are manufacturing costs?
Costs associated with the production function in a factory
What are some non-manufacturing costs, and what kind of cost are they?
Marketing and selling costs
- these are costs necessary to get the order and deliver the product
What are administrative costs?
All executive, organisational, and clerical costs that cannot be reasonably assigned to manufacturing or marketing
What do product costs include?
Direct materials, direct labour and manufacturing overhead
What are period costs?
Costs that are not included in the product costs. They are written off to the Statement of Profit or Loss when sold. Before they are on the statement of financial position as assets
