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This 2 page One Day of Notes was uploaded by Emily Hudson on Sunday February 1, 2015. The One Day of Notes belongs to ACC301 at University of Miami taught by Bochkay in Fall. Since its upload, it has received 105 views. For similar materials see Cost Accounting in Accounting at University of Miami.
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Date Created: 02/01/15
Ch 2 An Intro To Cost Terms and Purposes 82914 Cost a sacri ced or forgone resource to achieve a speci c objective Budgeted cost a predicted cost Actual cost a cost that has occurred Cost object anything for which a cost measurement is desired Cost accumulation the collection of cost data in an organized way by means of an accounting system Cost assignment a general term that encompasses the gathering of accumulated costs to a cost object in two ways Tracing accumulated costs with a direct relationship to the cost object and Allocating accumulated costs with an indirect relationship to a cost object Direct costs can be conveniently and economically traced tracked to a cost object Indirect costs cannot be conveniently or economically traced tracked to a cost object Instead of being traced these costs are allocated to a cost object in a rational and systematic manner Variable costs change in total in proportion to changes in the related level of activity or volume of output produced Fixed costs remain unchanged in total for a given time period despite changes in the related level of activity or volume of output produced Costs are xed or variable only with respect to a speci c activity or a given time period Cost driver a variable such as the level of activity or volume that causay a ects costs over a given time span Costs may be classi ed as DirectIndirect and VariableFixed These multiple classi cations give rise to important cost combinations Direct and variable Direct and xed Indirect and variable Indirect and xed TYPES OF FIRMS Manufacturing companies purchase materials and components and convert them into nished products Merchandising companies purchase and then sell tangible products without changing their basic form Service companies provide services intangible products like legal advice or audits TYPES OF INVENTORY Manufacturing Company Direct materials resources instock and available for use Workinprocess or progress products started but not yet completed often abbreviated as WIP Finished goods products completed and ready for sale Merchandising Company Only one type of inventory merchandise inventory CLASSIFICATIONS OF MANUFACTURING COSTS Also known as inventoriable costs Direct Materials acquisition costs of all materials that will become part of the cost object Direct Labor compensation of all manufacturing labor that can be traced to the cost object Overhead Costs indirect manufacturing costs factory costs that are not traceable to the product in an economically feasible way Examples include lubricants indirect manufacturing labor utilities and supplies INVENTORIABLE vs PERIOD lnventoriable costs are all costs of a product that are considered assets in a company s balance sheet when the costs are incured and that are expensed as cost of goods sold only when the product is sold For manufacturing companies all manufacturing costs are inventoriable costs Period costs are all costs in the income statement other than cost of goods sold They are treated as expenses of the accounting period in which they are incurred COST FLOW FORMULA Begging Inventory Balance New Inventory Ending Inventory Used Inventory OR Begging Inventory Balance New Inventory Used Inventory Ending Inventory OTHER COSTS Prime costs Direct Materials Direct Labor Conversion cost Direct Labor Overhead Overtime labor costs are considered part of indirect overhead costs