Chapter 1 acct 252 vocab

Direct costs

can easily be traced to the specific product

Manufacturing overhead (indirect costs)

costs that support production but cannot be traced to one product specifically

Selling Costs

Costs of getting customers to buy the product and delivering it to them

Direct if they relate to a customer’s shipping cost on their order, credit card fee charged on specific transaction, etc.

indirect if they support overall sales activity like advertising for the entire company, costs of maintaining the company website, salary of the sales manager

Administrative Costs

costs of running the business, such as executive salaries, office staff wages, and office expenses.

Direct if they relate to a specific department or activity.

Indirect if they support the business as a whole.

variable costs

A cost that changes as activity changes. If you make or sell more, the total cost increases; if you make or sell less, the total cost decreases. Cost per unit stays the same.

Example: Direct materials.

fixed costs

A cost that stays the same in total, even when activity goes up or down (within a normal range). Cost per unit changes as activity changes.

example: Factory rent of $10,000 per month.

Make 1,000 units → $10 per unit

Make 2,000 units → $5 per unit

The total rent stays $10,000, but the cost per unit decreases as more units are made.

mixed costs

A cost that has both a fixed part and a variable part.

Example: A cell phone bill with a monthly fee (fixed) plus charges based on usage (variable).