Direct costs= the particular cost object and also can be traced to that price object in an financially feasible (cost-effective) way, such as steel...traced to price object easily!Indirect costs= details cost object but cannot it is in traced to that expense object in an financially feasible (cost-effective) way, such as salaries
Because direct costs that room traced to a details cost thing are an ext accurately assigned come that expense object than indirect allocated costs. Supervisors prefer to use more accurate prices in their decisions. (When prices are allocated, managers are less details whether the price allocation base accurately steps the resources demanded by a cost object)-anything indirect becomes overhead-you can"t manage it!
Three factors:-The materiality the the price in question.-Available information-gathering technology.-Design the operations.
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Variable cost= changes in total in proportion to changes in the connected level the total activity or volume. An instance is a sales commission the is a percent of each sales revenue dollar. (increases as amount increases!)Fixed cost= remains unchanged in full for a given time period, despite large changes in the connected level the total activity or volume of calculation produced. An instance is the leasing expense of a an equipment that is unmodified for a provided time period (such as a year) nevertheless of the variety of units of product produced on the machine. (doesn"t adjust as volume or quantity does!...as amount increases, fixed expense per unit decreases)
A price driver is a variable, such together the level of task or volume, that causally affects complete costs end a offered time pan...contributes the many to the cost, causes the cost!For example, the variety of vehicles assembles is a driver of the prices of steering wheels on a motor-vehicle assembly line.
what is the relevant range. What function does the relevant-range concept play in explaining how prices behave.
Relevant range=the band of normal task level or volume in which over there is a certain relationship between the level of activity or volume and the price in question. Costs are defined as variable or addressed with respect to a specific relevant range...normal for range between quantity and costs..something is fixed at a particular point in production
A unit price is computed by dividing some amount of complete costs ( the numerator) by the related variety of units ( the denominator)...includes fixed costs and also variable costs-limited to that volume, that amount produced.In many cases, the full costs will consisted of a fix price that will not adjust despite transforms in the variety of units.
Manufacturing-sector companies= acquisition materials and also components and also convert them right into various perfect goods, for example automotive and textile companies.Merchandising-sector companies=purchase and also then market tangible products without changing their straightforward form, for instance retailing or distribution.Service-sector companies=provide services or intangible assets to their customers, because that example, legal advice or audits.
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Manufacturing companies have actually one or an ext of the following three varieties of inventory:1. Direct materials inventory. Direct materials in stock and also awaiting use in the production process.2. Work-in-process inventory. Goods partially operated on however not however completed. Additionally call work-related in progress.3. Finished goods inventory. Items completed but not yet sold
Inventorial costs= all costs of a product the are taken into consideration as assets in the balance sheet as soon as they are incurred and also that end up being cost of items sold when the product is sold. These costs are had in work-in-process and also finished items inventory (they are "inventoried") to collected the costs of creating these assets...flows from Balance paper to COGSPeriod costs=all expenses in the earnings statement various other than price of goods sold. These prices are treated as prices of the accounting period in i m sorry they are incurred due to the fact that they are expected not to advantage future periods...go appropriate to revenue statement!
define the following: straight material costs, direct manufacturing job costs, manufacturing over head costs, element costs, and conversion costs.
Direct product costs= the acquisition prices of all materials that eventually become part of the price object (W/P and also then FG) and can it is in traced to the expense object in an economically feasible way.Direct production labor costs= the compensation of all manufacturing labor that deserve to be traced to the cost object (W/P and also then FG) in an financially feasible way.Manufacturing overhead costs=all manufacturing prices that are related to the expense object (W/P and also then FG) however cannot be traced to that expense object in an economically feasible way..need to be estimatedPrime costs= all direct manufacturing costs (direct material and also direct production labor).Conversion costs- every manufacturing prices other than straight material costs(labor and also overhead_