is incurred when a resource is used for some purpose.
it means spending money or using resources to do something.
Cost
cost are assembled into meaningful groups called?
is a group of related cost put together.
Cost Pool
any factor that changes the level of total cost.
is something that causes cost to increase or decrease.
Cost driver
Any product, service, customer, activity, or unit to which cost are assigned.
is what you are tracking costs for.
Cost Object
the process of assigning cost to cost pools or cost objects.
its how you give cost to different things like products or departments.
Cost Assignment
cost traced easily and economically to a cost object.
these are cost you can clearly and directly point to a specific product, service or job.
Direct Cost
Costs not easily or economically traced to a cost object.
these are cost that help un making the product but they are not tied to just one product, they are shared across many products or services.
Indirect Cost
Assignment of indirect cost using cost drivers.
Sharing indirect cost across different products or departments.
Cost Allocation
Another term for cost drivers used in cost allocation
the basis you used to divide indirect cost.
Allocation base
Costs of material that can be traced to outputs
Raw material used directly in making a product.
Direct Material cost
Materials not easily traced to outputs
Materials used in production but not directly part of the product.
Indirect Material Cost
Labor that can be traced to outputs
Wages paid to workers who make the product.
Direct Labor Cost
Labor that cannot be traced directly to outputs
Wages paid to workers who make the product.
Indirect labor cost
includes all the indirect cost in manufacturing.
all cost that support production but are not direct materials or labor.
Overhead
Three main types of cost
- Direct Material
- Direct labor
- Overhead
Direct Materials + Direct Labor
Prime Cost
Direct Labor + Overhead
Conversion cost
Determined for each activity using analysis
this cost driver is based on the specific task done during the production.
(“the more time you do a task the more cost”)
Activity-Based
Based on the amount produced or service provided
this cost driver depends on how many unit you make. the more you make the higher the total cost.
Volume-Based
Strategic and long-term decisions
these are cost related to big decisions that affect the company’s setup and future.
Structural Cost Driver
Operational and short-term decisions
these are cost affected by day-to-day actions and choices inside the company.
Executional Cost Driver
Cost that changes with the quantity of output.
Variable cost
Cost that stays the same even if output changes.
Fixed cost
Includes both fixed and variable parts
Mixed cost
