Cost related DEF Flashcards
(15 cards)
Cost Object
is anything for which a separate measurement of costs is desired. Examples include a product, service, project, customer, activity, department or program.
Direct cost
any cost that is related to the cost object and can be traced to that cost object in an economically feasible way.
Indirect cost
costs that are related to the cost object but cannot be traced to that cost object in an economically feasible way.
Cost tracing
the assignment of direct cost to a cost object and the term cost allocation to describe the assignment of indirect costs to a cost object.
Cost driver
any factor that affects costs.
Variable cost
cost, that does change in total in proportion to changes in the cost driver.
Fixed cost
a cost that does not change in total despite changes in a cost driver.
Capitalized cost
are first recorded as an asset when they are incurred. They become cost of goods sold when the product is sold
Period costs
are expensed in the period in which they are incurred.
Four purposes of cost allocation
- Provide information for economic decisions
- Motivate managers and employees
- Justify costs or calculate reimbursement
- Measure income and assets for external regulatory purposes
Cost pool
A grouping of individual cost items
Three main methods of allocating costs
- direct (ignore reciprocal support departments) 2. step-down (partial recognition) 3. reciprocal (full recognition)
Common costs
the costs of operating a facility, operation or activity area that are shared by two or more users.
Stand-alone cost allocation
uses information pertaining to each operating entity to determine how to allocate the common costs
Incremental cost allocation
ranks cost objects and allocates common costs first to the primary cost object and then to the other remaining (incremental) cost objects
