Cost Concepts and Classifications

Front

What is the purpose of cost classifications?

Back

1. Assigning costs to cost objects 2. Accounting for costs in manufacturing companies 3. Preparing financial statements 4. Predicting cost behavior in response to changes in activity 5. Making decisions

Front

What are direct costs?

Back

Costs that can be easily and conveniently traced to a specified cost object.

Front

What are indirect costs?

Back

Costs that cannot be easily and conveniently traced to a specified cost object.

Front

What are the three basic manufacturing cost categories?

Back

1. Direct Materials 2. Direct Labor 3. Manufacturing Overhead

Front

Define Direct Materials.

Back

Materials that become an integral part of the finished product and can be conveniently traced to the finished product.

Front

Define Direct Labor.

Back

Labor costs that can be easily traced to individual units of product, also known as 'touch' labor.

Front

What is Manufacturing Overhead (MOH)?

Back

Manufacturing costs that cannot be traced directly to specific units produced, including indirect materials and indirect labor and depreciation expense of any manufacturing type machine/vehicles/PPE.

Front

What are Non-manufacturing Costs?

Back

1. Selling Costs: Necessary to secure the order and deliver the product. 2. Administrative Costs: All executive, organizational, and clerical costs.

Front

What are Product Costs?

Back

Costs that include direct materials, direct labor, and manufacturing overhead; they are inventoriable.

Front

What are Period Costs?

Back

Costs that include all selling costs and administrative costs; they are expensed in the period when incurred.