ACC 2200 Quiz 1 Revision Flashcards

Cost

Resources sacrificed to obtain a benefit.

Financial accounting classification of costs

As assets (future benefit) or expenses (used up in period).

Traditional costing assumption

Costs mainly change with production volume.

Modern costing approaches

Focus on cost management and root causes, using financial + non-financial data.

Different costs for different purposes rule

The same cost can be classified differently depending on context.

Variable costs

Change in proportion to activity level.

Fixed costs

Stay constant in total regardless of activity.

Direct costs

Easily traced to a cost object.

Indirect costs

Cannot be economically traced to a cost object.

Responsibility of managers

Only for controllable costs.

Upstream costs

R&D, design, supply before production.

Downstream costs

Marketing, distribution, service after production.

Prime costs

Direct Materials (DM) + Direct Labour (DL).

Conversion costs

Direct Labour (DL) + Manufacturing Overhead (MOH).

Product costs

Inventoriable until sold (DM, DL, MOH).

Period costs

Expensed when incurred (not inventoriable).

Cost driver

A factor that causes a cost to be incurred.

Activity-based costing (ABC)

Recognises multiple cost drivers at unit, batch, product, facility levels.

Step fixed costs

Remain fixed then jump when activity crosses a threshold.

Semi-variable (mixed) costs

Y = a + bX (fixed + variable parts).

Curvilinear costs

Marginal costs change with activity (nonlinear).

Cost estimation approaches

Judgement, engineering, quantitative analysis.

High-low method

Uses highest and lowest activity points to estimate costs.

Applied overhead

Budgeted overhead applied to products using a predetermined rate.

Overapplied overhead

Applied > Actual overhead (too much allocated).

Job costing

Used for unique/custom jobs (e.g. printing, construction).

Process costing

Used for mass/repetitive production (e.g. oil, chemicals).

Equivalent units

Measure of work done in partially completed units.

Weighted average vs FIFO

WA blends beginning WIP with new costs; FIFO keeps them separate.