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Cost Object


Direct Costs


Indirect Costs


Cost Allocation


Cost Behavior


Variable Costs


Fixed Costs


Total Costs


Per Unit Costs

Total manufacturing costs divided by units produced

Relevant Range


Identify how manufacturing, merchandising, service sector companies differ from each other

Manufacturing companies purchase materials and convert them into various finished goods, merchandising sector companies purchase and sell tangible products without changing their basic form, and service sector companies provide services or intangible products to their consumer

Identify 3 different types of inventory that manufacturing companies hold

direct materials, work-in-process, and finished goods

Distinguish b/w inventoriable costs and product costs

Inventoriable costs are all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold when the product is sold. Period costs are all costs in the income statement other than cost of goods sold. Period costs are treated as expenses of the accounting period in which they are incurred because they are expected to benefit future periods.

Direct Material Costs

costs of materials that can be traced to the cost object

Direct Manufacturing Labor Costs

compensation of all manufacturing labor that can be traced to the cost object

Manufacturing Overhead Costs

all manufacturing costs that are related to the cost object

Prime Costs

All direct manufacturing costs

Conversion Costs

All manufacturing costs other than direct material costs

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