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Lecture 9
Fichas del conjunto (19)
- 1What is a cost?-Sacrificed resource to achieve a particular objective
-Usually measured in monetary terms
-Must be assigned to a cost object that caused the cost to be incurred - 2Cost objectAnything for which a separate measurement of cost is required
- 3Costs in the accounting info system-Geographic regions
-Business units
-Services
-Products
-Business processes
-Customers - 4Costing system-Used by entities to collect and report the cost of resources used by particular cost objects
-Track product costs for financial reporting purposes as well as all other costs incurred by the business - 5Internal value chainRepresents all the linked value-creating activities undertaken within an entity operation
- 6Internal value chain: Manufacturer1. R&D
2. Design
3. Supply
4. Production
5. Marketing
6. Distribution
7. Customer support - 7Internal value chain: Service provider1. R&D
2. Design
3. Production/Delivery
4. Marketing
5. Customer support - 8Direct costA cost that can be easily identified or traced to a cost object
-Considered to vary in proportion to units
-Direct material/direct labour costs - 9Indirect (overhead) costsA cost that cannot be easily identified or traced to a cost object
-Also referred to as factory, production, or manufacturing overheads
-Used for benefit of multiple cost objects - 10Product costThe cost of converting raw material into a finished product
-Includes manufacturing costs only
-Sits as an asset (inventory) until sold then expenses as cost of sales - 11Period costAll other costs incurred to support business activities (non manufacturing costs)
-Expensed as incurred in the current accounting period
-Selling, admin costs, etc - 12Type of costing systemThis is influenced by an entity's product range and processes
Process costing system:
-Used by entities that assign costs to mass-produced products/services
Job costing system
-Used by entities to assign costs to custom products/services - 13Full costingIncludes the total amount of resources sacrificed to achieve a particular objective
-Considers both direct and indirect costs - 14Allocation of indirect(overhead) costsCost driver:
-Provides a measure of activity that explains the cost objects use of the indirect cost
Allocation base:
-A variable used to allocate costs from the cost pool to an object
-Example: number of units produced, direct labour hours, machine hours, floor space, etc - 15Types of cost driversA cost driver is an activity or factor that causes a root cost to be incurred
Volume based:
-Assumes costs are driven by the volume of production/sales (labour, machine hours)
Resource driver:
-Costs are driven by resource consumption by activities
Activity driver:
-Assign costs from activities to cost objects - 16Indirect cost rate formulaIndirect costs to be allocated
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Total cost driver usage - 17Cost VarianceWhen there is a difference between budgeted and actual costs in the indirect cost allocation
-Either overapplied or underapplied
-If variance is significant:
Prorated between cost of sales and inventory, or
Written off against cost of sales - 18Cost based pricing-Apply a mark-up to the calculated product or service cost
-Ignores customer demand (could be higher or lower than what they are willing to pay) - 19Market based pricing-Based off some measure of customer demand
-Influenced by differentiation of competition in the market
-Difficult to calculate
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- FInancial info for decision making Fichas sobre Lecture 9, creado por Jacob Lewis el 06/06/2019.
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- Jacob Lewis
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