Lecture on Product Costs and Cost Behavior

Flashcards covering key concepts related to product costs, cost behavior, and financial analysis techniques discussed in the lecture.

Product Cost

Costs that are inventoried and expensed as Cost of Goods Sold when the product is sold.

Period Cost

Costs that are expensed immediately, such as selling and administrative costs.

Direct Costs

Costs that are traceable to a product.

Indirect Costs

Costs that are not easily traceable to a product.

Cost of Goods Manufactured Formula

Beginning Work in Process plus total manufacturing costs minus ending Work in Process.

Cost of Goods Sold Formula

Beginning Finished Goods plus Cost of Goods Manufactured minus ending Finished Goods.

Average Cost per Unit

Total cost divided by the number of units produced.

Upstream Costs

Costs that occur before production.

Downstream Costs

Costs that occur after production.

Manufacturing Overhead

All factory costs other than direct materials and direct labor.

Underapplied Overhead

When applied overhead is less than actual overhead.

Overapplied Overhead

When applied overhead is greater than actual overhead.

Variable Cost Behavior

Total variable cost changes while variable cost per unit remains constant.

Fixed Cost Behavior

Total fixed cost remains constant while fixed cost per unit changes.

Contribution Margin

Sales minus variable costs.

Break-even Point

The level of sales where profit equals zero.

Operating Leverage

Measures how sensitive profit is to changes in sales.

Margin of Safety

Actual sales minus break-even sales.

CVP Assumptions

Constant selling price, constant costs, relevant range applies, units produced equal units sold.