Chapter 2 Flashcards
(31 cards)
Cost
Sacrifice of resources
Expense
Cost that is charged against revenue in an accounting period
Outlay cost
Past, present, or future cash outflow
Opportunity cost
Forgone benefit from the best alternative course of action
Operating profit
Excess of operating revenues over the operating costs necessary to generate those revenues
Product costs
Costs assigned to the manufacture of products and recognized when sold
Period costs
Costs recognized when incurred
Direct manufacturing/indirect manufacturing costs
Direct: product costs that can be identified with units of production
Indirect: All product costs except direct
Direct materials
Materials directly identified with the product
Direct labor
Labor directly identified with the product
Manufacturing overhead
All production costs except direct labor and materials
Prime costs
All direct costs
Conversion costs
Direct labor and manufacturing overhead (what converts direct materials into final product)
Marketing costs
Advertising, sales commissions, and shipping costs
Administrative costs
Executive salaries, costs of data processing, and legal costs
Cost allocation
Assigning costs
Cost object
Any end to which a cost is assigned
Cost pool
Collection of costs to be assigned to cost objects
Direct cost
Any cost related to a cost object
Indirect cost
Any cost NOT related to a cost object
Work in process
Product in production, but not yet complete
Finished goods
Product complete, not sold
Fixed costs
Remain unchanged as the volume of activity changes
Variable costs
Change in direct proportion to the change in volume of activity
