An Introduction to Cost Terms and Purposes

Basic Cost Terminology ( Thuật ngữ

chi phí cơ bản)
 Cost—a sacrificed or forgone resource to achieve a specific objective.

(Chi phí—một nguồn lực bị hy sinh hoặc bị bỏ đi để đạt được một mục tiêu cụ
thể)
 Actual cost—a cost that has occurred (a historical or past cost)

(Chi phí thực tế - chi phí đã xảy ra (chi phí lịch sử hoặc quá khứ))
 Budgeted cost—a forecasted, or a predicted cost(a future cost)

(Chi phí dự toán—chi phí dự kiến ​hoặc chi phí dự đoán (chi phí trong tương
lai))
 Cost object—anything for which a cost measurement is desired.

(Đối tượng chi phí—bất

2- cứ thứ gì mà việc đo lường chi phí được mong muốn)
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Cost Object Examples at Tesla

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 Basic Cost Terminology
 Cost accumulation—the collection of cost data in an organized way by means of

an accounting system.

(Tích lũy chi phí—việc thu thập dữ liệu chi phí một cách có tổ chức thông qua hệ
thống kế toán)
 Cost assignment—a general term that encompasses the gathering of accumulated

costs to a cost object in 2 ways:

(Phân bổ chi phí—một thuật ngữ chung bao gồm việc tập hợp các chi phí tích lũy
cho một đối tượng chịu chi phí theo 2 cách)
 Tracing (Truy tìm) accumulated costs with a direct relationship to the cost

object
 Allocating(Phân bổ) accumulated costs with an indirect relationship to a cost

object. 2- 4
Cost assignment to a cost object

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 Cost classification by
traceability(khả năng tập hợp)
Direct costs (Chi phí trực tiếp) Indirect costs (Chi phí gián
Costs that can be tiếp)
easily and conveniently Costs cannot be easily and
traced to a cost objective. conveniently traced to a
Examples: the cost of steel or cost objective.
tires(lốp) of Tesla Model 3s. Example: the salaries of
plant administrators
(including the plant
manager)
Factors Affecting Direct/Indirect Cost
Classification
The materiality of the cost in question (Tính trọng yếu của
chi phí được đề cập)
The available information-gathering technology.
Design of operations.

NOTE: a specific cost may be both a direct cost of one cost

object and an indirect cost of another cost object (một chi
phí cụ thể có thể vừa là chi phí trực tiếp của một đối tượng
chi phí vừa là chi phí gián tiếp của một đối tượng chi phí
khác.)
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Cost classification(phân loại) by behavior
 Variable costs—change in total in proportion to changes in the

volume, or number of units achieved, of the cost object

(Chi phí biến đổi—sự thay đổi về tổng tỷ lệ với những thay đổi về số lượng
hoặc số lượng đơn vị đạt được của đối tượng chi phí.)
 Fixed costs (Chi phí cố định) — remain unchanged in total, for a given

time period, despite changes in the volume, or number of units

achieved, of the cost object.

Costs are fixed or variable only with respect to a specific cost object and a
given time period (Chi phí chỉ là cố định hoặc thay đổi đối với một đối
tượng chi phí cụ thể và trong một khoảng thời gian nhất định)
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Cost classification by behavior
 Variable costs per-unit are constant (Chi phí biến đổi trên mỗi đơn

vị là không đổi.)

If a product takes 5 pounds of materials each, it stays the same per unit
regardless if one, ten, or a thousand units are produced.
 Fixed costs per unit change inversely with the level of production

(Chi phí cố định trên mỗi đơn vị thay đổi nghịch đảo với mức độ sản
xuất)

As more units are produced, the same fixed cost is spread over more and
more units, reducing the cost per unit.

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 Variable Costs
Behavior of total and unit variable costs

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 Fixed Costs
Behavior of total and unit fixed costs

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 Other Cost Concepts
 Cost driver (Nhân tố chi phí)—a variable, such as the level of activity or volume, that

causally affects costs over a given time span.

Ex: The miles driven by trucks to deliver products are a cost driver of distribution costs
 Relevant range—the band or range of normal activity level (or volume) in which

there is a specific relationship between the level of activity (or volume) and the cost
in question.

(Phạm vi phù hợp—dải hoặc phạm vi mức độ (hoặc khối lượng) hoạt động bình thường trong
đó có mối quan hệ cụ thể giữa mức độ hoạt động (hoặc khối lượng) và chi phí được đề cập

Ex: a fixed cost is fixed only for a given range of volume or activity (at which the company
is expected to operate) and only for a given time period (usually a particular budget
period).

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Relationships Between Types of Costs

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Total Costs and Unit Costs

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 Different Types of Firms
Manufacturing-sector companies purchase materials

and components and convert them into finished products.

Merchandising-sector companies purchase and then sell

tangible products without changing their basic form.

Service-sector companies provide services (intangible

products) like legal advice or audits.

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 Types of inventory
Manufacturing-sector companies hold 3 types of inventory
Raw materials (Nguyên liệu thô)—resources in-stock and

available for use

Work-in-process (or progress) (SP dang dở)—products

started but not yet completed, often abbreviated as WIP

Finished goods—products completed and ready for sale

Merchandising-sector companies hold only one type of

inventory: merchandise inventory

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Cost classification by functions

A. Manufacturing costs (Chi phí sx)

(Product or Inventoriable costs).

B. Non-manufacturing costs (Chi phí ngoài

sx)

(Period costs).
 Manufacturing
Manufacturing
Direct
Direct Direct
Direct Overhead
Overhead
Materials
Materials Labor
Labor (Chi
(Chi phí
phí sx
sx chung)
chung)

The Product
The acquisition costs of all materials that eventually become
part of the cost object; they can easily and unambiguously
be traced to the cost object

Example:
Example: A
A radio
radio installed
installed in
in an
an automobile
automobile
Those labor costs that can be easily and unambiguously be
traced to the cost object

Example:
Example: Wages
Wages paid
paid to
to automobile
automobile assembly
assembly workers
workers
Manufacturing costs that are related to the cost object, but that cannot
easily and unambiguously be traced to the cost object

Examples:
Examples: Indirect
Indirect materials
materials and
and indirect
indirect labor
labor
 Direct Direct Manufacturing
Material Labor Overhead

Prime Conversion
Cost Cost
(Chi phí (Chi phí
cơ bản) chế biến)
 Administrative
Costs

All executive (điều hành),

organizational, and clerical
costs.
Quick Check 
Which of the following costs would be considered
manufacturing overhead at Boeing? (More than one
answer may be correct.)

A. Depreciation on factory forklift trucks.

B. Sales commissions.

C. The cost of a flight recorder in a Boeing 767.

D. The wages of a production shift supervisor.

Inventoriable costs vs. Period costs
Product/ Inventoriable costs are all costs of a product that

are considered assets in a company’s balance sheet when the

costs are incurred 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

(ngọại trừ) cost of goods sold. They are treated as expenses of

the accounting period in which they are incurred.

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 Inventoriable costs include Period costs include all selling
direct materials, direct labor, and costs and administrative costs.
manufacturing overhead.

Expense
Inventory Cost of Good Sold

Sale

Balance Income Income

Sheet Statement Statement
Quick Check 
Which of the following costs would be considered a
period rather than a product cost in a manufacturing
company?
A. Manufacturing equipment depreciation.

B. Property taxes on corporate headquarters.(period cost)

C. Direct materials costs.

D. Electrical costs to light the production facility.

 Income
Balance Sheet
Statement
Costs Inventories Expenses
Material Purchases Raw Materials

Direct Labor Work in

Process
Manufacturing
Overhead Cost of
Finished
Goods
Goods
Sold

Selling and Period Costs Selling and

Administrative Administrative
Quick Check 

Which of the following transactions would immediately

result in an expense? (There may be more than one
correct answer.)
A. Work in process is completed.

B. Finished goods are sold.

C. Raw materials are placed into production.

D. Administrative salaries are accrued and paid.

AQUAS is a bottled water producer. It was established on Oct. 1, 2013.
Clever Man – the company’s accountant is required to prepare an income
statement to report on the first quarter performance.
Bỏ: Material purchased, plant rent, payment for plant utility
AQUAS
Income Statement
For the quarter ended Dec. 31, 2013
(in VND mil.)
1. Sales 800
2. Expenses
Materials purchased 200
W ages for workers 100
W ages for marketing staff 50
Salaries for office clerks 60
Payment for Advertising 150
Plant rent 55
Office rent 65
Payment for office utility 120
Payment for plant utility 180
Total expenses 980
3. Loss (180)
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Cost flows illustrated

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Multiple-step income statement

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Multiple-step income statement

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 Measuring Costs Requires Judgment
It is very important to clearly define and understand how
costs are measured in a particular situation or company.
Measuring a cost depends on the specific situation, purpose, or

question that management is trying to address (giải quyết).

Different companies or sometimes even different subunits

within the same company may define and classify costs

differently.

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Different product Costs for Different purposes
Pricing and product-mix decisions—decisions about pricing

and maximizing profits (tối đa hóa lợi nhuận)

Contracting with government agencies—very specific

definitions of allowable costs for “cost plus profit” contracts

Preparing external-use financial statements—GAAP-driven

product costs only

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Different product Costs for Different purposes

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 Meaning of Different cost classifications
These different cost classifications help managers make decisions
and evaluate performance (đánh giá hiệu suất)
1.Identify the problem and uncertainties: how much to price a product; how
much it costs to make the product.

2.Obtain (thu thập) information: identify the direct and indirect costs of a
product in each business function, and gather other information about
customers, competitors, the prices of competing products.

3.Make predictions about the future: estimate what it will cost to make the
product in the future; predict the quantity of the product they expect the
company to sell as well as have an understanding of fixed and variable costs.

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 Meaning of Different cost classifications

These different cost classifications help managers make decisions

and evaluate performance

4. Make decisions by choosing among alternatives: choose a price to

charge based on a thorough understanding of costs and other
information.

5. Implement (thực hiện) the decision, evaluate performance, and

learn: control costs and learn by comparing the actual total costs and
unit costs against budgeted amounts.

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Alternative Classifications of Costs

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 A framework for cost accounting
The following three features of cost accounting can be used for a wide
range of applications

1.Calculating the cost of products, services, and other cost objects

2.Obtaining information for planning and control, and performance

evaluation

3.Analyzing the relevant information for making decisions

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