Chapter 4 Flashcards
(17 cards)
What is cost object?
A cost object is any object for which we assign a cost to.
What is a direct cost? Give an example.
A direct cost can be directly traced to a product or service with a high degree of accuracy. It can be directly traced to the finished product. e.g. buttons for a shirt
What is an indirect cost? Give an example.
Indirect costs are not easily traced to a final product of service. They are either too insignificant or not incorporated with the finished product. e.g. a factory cleaners wage
What is a fixed cost? Give an example.
Fixed costs do not change in total when the level of activity changes. e.g. Rent on land
What is a variable cost? Give an example.
Variable costs change depending on the total level of activity. e.g. Electricity bill
What is a mixed cost? Give an example.
Mixed costs contain both elements from variable and fixed costs. e.g. for example, the total telephone bill
What are direct materials? Give an example.
Direct materials are raw materials that are directly traceable to the product being made. e.g. paper in a book
What are indirect materials? Give an example.
Indirect materials are raw materials that are directly traceable to the product being made and so are instead used a manufacturing overhead. e.g. thread for buttons on a shirt
What is direct labour cost?
A direct labour cost is the amount paid to employees that can be directly traced to the finished product.
What is an indirect labour cost?
A indirect labour cost represent the amount paid to workers that can not be easily traced to the finished product, like a cleaner. These instead become part of a manufacturing overhead.
What is a manufacturing overhead?
A manufacturing overhead represents costs that are not direct materials or direct labour, but are still a part of the manufacturing process.
What is a product cost? Give an example.
Costs that are attributable to the making/selling of a product. They are seen as assets. e.g. Direct materials
What is a period cost? Give an example.
Costs not relating directly to a product or service, and so are labelled as an expense. e.g. Advertising
Define cost accounting.
Cost accounting is the measuring, analysing, recording and reporting on the cost of a product of service.
What is normal costing?
A system that calculates the cost of a product or service using the actual direct materials, actual direct labour and a predetermined overhead rate.
What is standard costing?
A system that uses product costing where the cost of a product is based on the predicted costs for materials, labour and overhead rate.
What is the formula for the predetermined overhead rate?
Budget manufactured overhead cost divided by the cost driver (given).
