COST CONCEPTS

AND BEHAVIOR
COST
Cost is commonly defined as a measurement, in monetary terms, of
the amount of resources used for some purposes.
COST OBJECT
It is often a product or department for which costs are accumulated
or measured.
COST POOL
It is a grouping of individual costs, typically by department or
service center.
COST DRIVER
It is the unit of an activity that causes the change in activity’s cost.
COST ACTIVITY
It refers to any event, action, transaction or work sequence that
incurs costs when producing a product or providing a service.
CLASSIFICATION OF COSTS
1. Assignment to Cost, to Cost Object
a. Direct Costs
b. Indirect Costs

2. Accounting for Cost in Manufacturing companies

c. Manufacturing Costs
d. Non-Manufacturing Costs
CLASSIFICATION OF COSTS
3. Preparations of Financial Statements
a. Product Cost
b. Period Cost

4. Predicting of Cost Behavior in response to changes in activity

c. Variable Cost
d. Fixed Cost
e. Mixed Cost
CLASSIFICATION OF COSTS
5. Making Decisions
a. Differential Cost
b. Sunk Cost
c. Opportunity costs
CLASSIFICATION OF COSTS
THE RELEVANCE RANGE
The relevance range is the range of activity within which
management expects a company to operate.
COMMITTED COSTS AND
DISCRETIONARY COST
What is the Difference between Committed costs and
discretionary cost?
METHODS OF SPLITTING
MIXED COSTS
1. High-Low Points Method
2. Statistical Scatter-Graph Method
3. Methods of Least Square ( Regression Analysis)
PROBLEM SOLVING