Acct ch 2

product cost

cost assigned to inventory

period cost

anything that isnt a product cost (selling and administration)

manufacturing costs

direct material, direct labor, manufacturing overhead

direct material

raw material that is physically incorporated in the finished product

direct labor

cost of salaries, wages and benefits for people working directly on production of goods/services

manufacturing overhead

indirect material, indirect labor, others

indirect material

not physically part of the finished product or insignificant part in terms of cost

indirect labor

labor cost of production related employees who dont work directly on the product

prime costs

directly attributed to products

conversion costs

cost of converting raw material into finished products

cost driver

a characteristic of an activity or event that causes cost to be incurred

variable cost

a cost that changes, in direct proportion to to a change in activity level/cost driver

fixed cost

a cost that remains constant in total as activity changes

cost object

units to which costs are assigned

direct cost

ost that can be traced to a particular cost object

indirect cost

cost that cannot be traced to a particular cost object

controllable cost

cost that a manager can control or heavily influence

uncontrollable cost

cost that a manager cant control or influence

opportunity cost

the potential benefit given up by choosing one option over another

out of pocket cost

cost that requires the expenditure of cash or other assets

sunk cost

cost that incurred in the past and cannot be altered by any current or future decision