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BMFP 3582-Chapter 3456 Cost (Direct-Indirect-Marginal-Standard)

BMFP 3582-Chapter 3456 Cost (Direct-Indirect-Marginal-Standard)

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Published by Haery Sihombing

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Published by: Haery Sihombing on Jul 18, 2008
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05/09/2014

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Chapter 3Chapter 3
DIRECT COSTDIRECT COST
Chapter 4
INDIRECT COSTS
Ir. HaeryIr. HaerySihombingSihombing/IP/IPPensyarahFakultiKejuruteraanPembuatanUniversitiTeknologiMalaysia Melaka
COST
COST
CostCostis not a simple concept. It isis not a simple concept. It isimportant to distinguish betweenimportant to distinguish betweenfour different typesfour different types--
fixedfixed, variable,, variable,averageaverage
andand
marginalmarginal
..
Monetary measure of resources given up toMonetary measure of resources given up toattain an objective (such as acquiring a goodattain an objective (such as acquiring a goodor delivering a service)or delivering a service)
 A A
cost cost 
may be defined as a sacrifice ormay be defined as a sacrifice orgiving up of resources for a particulargiving up of resources for a particularpurpose.purpose.
Costs are frequently measured by theCosts are frequently measured by themonetary units that must be paid formonetary units that must be paid forgoods and services.goods and services.
COST
Cost and Cost TerminologyCost and Cost Terminology
Cost 
is a resource sacrificed or forgone to achievea specific objective.An
actual cost 
is the cost incurred (a historical cost)as distinguished from budgeted costs.A
cost object 
is anything for which a separatemeasurement of costs is desired.
 
Cost AssignmentCost Assignmentis bothCost ObjectTracing
Direct CostsDirect Costs
Allocating
Indirect CostsIndirect Costs
Cost and Cost TerminologyCost and Cost TerminologyCost ClassificationsCost Classifications
 Association with cost object Association with cost object
Cost objectCost objectis anything for which management wants tois anything for which management wants tocollect or accumulate costscollect or accumulate costs
DirectDirect--traceable to a cost objecttraceable to a cost object
IndirectIndirect--not conveniently or practically traceablenot conveniently or practically traceableto a cost objectto a cost object
treated as overheadtreated as overhead
allocatedallocated
Cost Classifications CategoriesCost Classifications CategoriesCosting SystemCosting System
Cost ObjectCost Object
anything for which a separate measurement of costs isanything for which a separate measurement of costs isdesireddesired
Direct CostDirect Cost
costs that are related to a particular cost object in ancosts that are related to a particular cost object in aneconomically feasible (Costeconomically feasible (Cost--effective) mannereffective) manner
Cost PoolCost Pool
a grouping of individual cost itemsa grouping of individual cost items
Cost Allocation BaseCost Allocation Base
a factor that is the common denominator for systematicallya factor that is the common denominator for systematicallylinking an indirect cost or group of indirect costs to a costlinking an indirect cost or group of indirect costs to a costobjectobject
 
Cost CategoriesCost Categories
 Association with cost object Association with cost object
Reaction to changes in activityReaction to changes in activity
 Variable Variable
FixedFixed
MixedMixed
StepStep
Relevant RangeRelevant Range
 –normal operating range
Cost AllocationCost Allocation
Same issue exists for merchandising firmsSame issue exists for merchandising firms
Easier for merchandising,Easier for merchandising,
purchase price (major)purchase price (major)
shipping cost (minor)shipping cost (minor)
taxes (minor)taxes (minor)
Classification of CostsClassification of Costs
This section concentrates on the bigThis section concentrates on the bigpicture of how manufacturing costspicture of how manufacturing costsare accumulated and classified.are accumulated and classified.
Cost ObjectiveCost Objective
 A A
cost objective cost objective 
oror
cost object cost object 
isisdefined as anything for which a separatedefined as anything for which a separatemeasurement of costs is desired.measurement of costs is desired.
 Examples include departments, products, activities, Examples include departments, products, activities,and territories.and territories. Accounts could be type of cost, to which product, Accounts could be type of cost, to which product,department?department?

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