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Chapter 2 Cost Accounting

Terms in this set (35)

Cost
sacrificed resource to achieve a specific objective
Actual cost
a cost that has occurred
Budgeted cost
a predicted cost
Cost object
anything of interest for which a cost is desired
Cost accumulation
- a collection of cost data in an organized manner
Cost assignment
a general term that includes gathering accumulated costs to a cost object.. you trace direct cost and allocate indirect cost
Direct costs
can be conveniently and economically traced (tracked) to a cost object
Indirect costs
cannot be conveniently or economically traced (tracked) to a cost object. Instead of being traced, these costs are allocated to a cost object in a rational and systematic manner
what are some examples of direct cost?
parts and assembly line wages
what are some examples of indirect cost?
electricity, rent , and property taxes
what factors affect direct/indirect cost ?
Cost Materiality
Availability of information-gathering technology
Operational Design
Variable costs
changes in total in proportion to changes in the related level of activity or volume
Fixed costs
remain unchanged in total regardless of changes in the related level of activity or volume
cost are fixed or variable cost with a respect to ?
a given time
what type of cost are constant on a per-unit basis ?
variable cost
what type of cost change inversely with the level of production ?
fixed cost
which type of cost is unchanged as a cost per unit ?
variable cost
____________ cost are unchanged in relation to output in total dollars
fixed
Cost Driver
a variable that causally affects costs over a given time span
Relevant Range
the band of normal activity level (or volume) in which there is a specific relationship between the level of activity (or volume) and a given cost
______ costs are considered ______ only within the relevant range.
fixed, fixed
cost caveat
Unit costs should be used cautiously. Since unit costs change with a different level of output or volume, it may be more prudent to base decisions on a total dollar basis.
Manufacturing-sector companies
create and sell their own products
Merchandising-sector companies
- product resellers
Service-sector companies -
provide services (intangible products
Inventoriable costs
product manufacturing costs. These costs are capitalized as assets (inventory) until they are sold and transferred to Cost of Goods Sold.
Period costs
- have no future value and are expensed as incurred.
The Cost of Goods Manufactured and the Cost of Goods Sold section of the Income Statement are accounting representations of the
actual flow of costs through a production system.
Prime cost
all direct manufacturing costs (labor and materials)
Conversion cost
direct labor and factory overhead costs, collectively
Overtime labor costs are
considered part of overhead due to the inability to precisely know the true cause of these costs
Pricing and product-mix decisions
may use a "super" cost approach (comprehensive)
Contracting with government agencies
very specific definitions of cost for "cost plus profit" contracts
Preparing external-use financial statements
GAAP-driven product costs only
what are the three Common Features of Cost Accounting & Cost Management
1. Calculating the cost of products, services, and other cost objects
2. Obtaining information for planning & control, and performance evaluation
3. Analyzing the relevant information for making decisions
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