ACCT 320 Ch 1 SG

cost object

anything for which cost data is desired

direct costs

costs that can be easily and conveniently traced to a unit of product or other cost object

indirect costs

costs that cannot be easily and conveniently traced to unit of product or other cost object

direct materials

raw materials that become an integral part of the product that can be conveniently traced directly to it

direct labor

labor costs that can be easily traced to individual units of product

manufacturing overhead

all manufacturing costs except direct materials and direct labor; cannot be traced to finished products

selling costs

costs necessary to secure the order and deliver the product; can be either direct or indirect

administrative costs

all executive, organizational, and clerical costs; can be either direct or indirect

period costs

selling and administrative costs

product costs

all costs involved in acquiring or making a product

prime costs

direct materials and direct labor

conversion costs

direct labor and manufacturing overhead

cost behavior

how a cost will react to changes in the level of activity

cost structure

the relative proportion of fixed, variable, and mixed costs in an organization

variable costs

cost changes in direct proportion to changes in activity level

activity base

a measure of whatever causes the incurrence of a variable cost

fixed cost

cost remains same

committed fixed cost

long term, cannot be significantly reduced in the short term

discretionary fixed cost

may be altered in the short term by current managerial decisions

relevant range

the range of activity within assumptions about variable and fixed costs are valid

mixed cost

contains both variable and fixed elements

mixed cost equation

Y = a + bX

a= fixed cost

b= variable cost per unit

X= level of activity

differential cost

the difference in cost between any two alternatives; can be fixed or variable

differential revenue

the difference in revenue between two alternatives

opportunity cost

potential benefit that is given up when one alternative is selected over another

sunk cost

cost has already been incurred and cannot be changed now or in the future

traditional income statement

split costs into Cost of Goods Sold and Selling and Administrative Expenses

contribution income statement

split costs into fixed and variable categories