Cost Concepts Copilot Flashcards
(45 cards)
What are the three main categories of manufacturing costs?
Direct materials, direct labor, and manufacturing overhead ## Footnote These are the components of total product cost in manufacturing.
What are direct materials?
Raw materials that can be physically and directly traced to the finished product ## Footnote Examples include wood for furniture or steel for cars.
What are indirect materials?
Materials that cannot be easily traced to specific products ## Footnote Treated as part of manufacturing overhead.
What is direct labor?
Work of employees directly involved in converting materials into finished goods ## Footnote Examples include assembly line workers.
What is indirect labor?
Labor that cannot be directly traced to specific products ## Footnote Included in manufacturing overhead, such as factory supervisors.
What is manufacturing overhead?
All manufacturing costs except direct materials and direct labor ## Footnote Includes indirect materials, indirect labor, depreciation, insurance, and factory maintenance.
What are the three inventory accounts in a manufacturing company?
Raw materials, work in process, and finished goods ## Footnote These appear in the current assets section of the balance sheet.
What is cost of goods manufactured (COGM)?
Total cost of goods completed during the period ## Footnote Calculated as: Beginning WIP + Total manufacturing costs – Ending WIP.
What is cost of goods sold (COGS)?
Cost of finished goods sold during the period ## Footnote Calculated as: Beginning finished goods + COGM – Ending finished goods.
What is a cost object?
Anything for which cost data is desired ## Footnote Examples include products, departments, or customers.
What is a cost driver?
A factor that causes a change in the cost of an activity ## Footnote Used as a basis for cost allocation.
What is a cost pool?
A collection of costs to be allocated to cost objects ## Footnote Often grouped by activity or department.
What is cost behavior?
How a cost changes in response to changes in activity level ## Footnote Classified as variable, fixed, or mixed.
What is the relevant range?
The range of activity within which cost behavior assumptions are valid ## Footnote CVP analysis assumes linearity within this range.
What is the difference between product and period costs?
Product costs are inventoriable; period costs are expensed when incurred ## Footnote Product costs include DM, DL, and MOH; period costs include S&A expenses.
What are variable costs?
Costs that change in total directly and proportionately with activity level ## Footnote Per unit cost remains constant at every level of activity.
What are fixed costs?
Costs that remain the same in total regardless of activity level ## Footnote Per unit cost decreases as activity increases.
What are mixed costs?
Costs that contain both variable and fixed elements ## Footnote Also called semi-variable costs; change in total but not proportionately with activity.
What is the relevant range?
The expected range of activity where cost behavior assumptions are valid ## Footnote Outside this range, cost patterns may change.
What method uses high and low points to separate fixed and variable components?
High-low method ## Footnote Uses only two activity levels; less accurate than regression.
What method uses scatterplots to estimate cost behavior?
Scattergraph method ## Footnote Helps visualize cost patterns and potential outliers.
What method provides the most precise cost estimation?
Least squares regression analysis ## Footnote Minimizes squared deviations to find best-fit line.
What is the general cost formula in regression?
y = a + bx ## Footnote y = total cost, a = fixed cost, b = variable cost per unit, x = activity level.
What is a cost driver?
A factor that causes a change in the cost of an activity ## Footnote Used to assign costs to cost objects.
