Cost Categorizing
Indirect or Direct
What are the two classifications of costs?
Raw materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product
What are direct materials?
adverting, shipping, sales travel costs
What are examples of selling costs?
A cost that remains constant, in total, regardless of changes in the level of activity
What is a fixed cost
Management accounts usually assume that costs are STRICTLY linear or that the relation between cost on the on hand and activity on the other can be represented by a straight line within
What is The linearity assumption?
A cost that can be easily and conveniently traced to a specified cost object.
What is a Direct Cost?
Raw materials whose costs can not be easily or conveniently traced to finished products.
The other names used to refer to selling costs
What are order- getting and order-filling costs?
Manufacturing overhead has fixed costs such as depreciation, insurance, property taxes, rent, and supervisory salaries
What are Examples of fixed costs
A cost that is incurred to support a number of cost objects but can not be traced to them individually.
What is a common cost?
The cost of paper used to create brochures at a printing company is the direct cost of the customer who buys brochures.
What is an example of a direct cost?
Consists of labor costs that can be easily traced to individual units of product.
What is direct labor?
Includes all costs that are inquired to secure customer orders and get the finished product to the customer.
What are selling costs?
Organizational investments as a multiyear planning horizon that can’t be significantly reduced even for short periods of time would making fundamental changes
What are committed fixed costs?
A cost that is incurred to support a number of cost objects but can not be traced to them individually.
What is the definition of common cost?
A cost that cannot be easily and conveniently traced to a specified cost object.
What is an indirect cost?
assembly line workers
What is an example of direct labor?
selling costs and administrative costs
What are the two cost categories of non-manfactoring costs?
Even if operations are disturbed, they remain largely unchanged in the short term because cost of later restoring are much higher
What are committed fixed costs?
The third manufacturing cost category
Includes all manufacturing costs except direct materials and direct labor.
What is manufacturing overhead?
The factory manager’s salary at Campbell soup in relation to the production of chicken noodle soup.
What is an example of an indirect cost?
Another term for direct labor
What is touch labor?
Often called selling, general, and administrative costs.
What are non-manufacturing costs?
investments in facilities and equipment, real estate taxes, insurance premiums, and salaries of top management
what are examples of fixed costs?
The range of activity within which the assumption that cost behavior is strictly linear is reasonably valid
What is relevant range?