Chapter 2 Flashcards
(34 cards)
Actual Cost
cost occurred (historical or past cost)
budgeted cost
predicted or forecasted cost (future cost)
What are budgeted costs used for
- measuring performance/control behavior
–planning and decision making
Direct Costs
the costs that are directly traced into a product
what are indirect costs
costs that are needed for continued production but cannot be physically traced
What is a product cost
a cost or expense that relates to the asset that gets consumed as part of generating the sale
how does a product cost get expensed
in the form of COGS and has to follow the matching principle
what is a period cost and how is it accounted for
cost not directly related to production of goods
recognized in the period incurred regardless of how many items are sold
how many T accounts do retailers have
one
for a retailer what you buy is…
what you sell
for a manufacturer what you buy…
is not what you sell, you buy as RM and then sell FG
If a company can continue to take RM and make FG while taking a cost away then is it the cost a product or period
period cost
What are the three product costs for manufactures
Direct Labor, Direct Materials and MOH
how are direct product costs accounted for?
they are assigned
how are indirect product costs accounted for?
they are allocated
what must the cost be in order for it to have to be allocated to various products
Necessary (product), common, and untraceable (indirect)
What is a fixed cost
a cost that does not change in TOTAL based on the number of units sold or produced
It does change per unit based on the number of units sold produced
*rent is still going to be the same no matter how many units you have but will change per unit depending on if you have 100 or 1000 units
What is a variable cost
a cost that does change in total based upon the number of units sold/produced but does not change per unit
What is a cost driver
a variable that affects cost over a given time span
ex: miles driven
what do unit costs approximate?
marginal costs (the cost added by producing one additional unit of a product or service)
what happens to the inventory costs for manufacturing firms
they are capitalized as an asset until they are sold
when we buy RM what do we not know until the product is turned into FG
the cost of the goods
No sale No expense goes which what type of cost
product costs
what is a materials requistion form
a document that shows the movement of raw materials out of RMI warehouse
