Incurred when a resource is used for some purpose.
Cost
The meaningful groups into which costs are collected.
Cost Pools
A factor that causes or relates to a change in the total cost of an activity.
Cost Driver
Any product, service, customer, activity, or organizational unit to which costs are accumulated for some management purpose.
Cost Object
A group of related products; useful for preparing profitability reports as part of lean accounting; all the activities required to create customer value for a family of products or services.
Value Stream
The process of assigning cost to cost pools or from cost pools to cost objects.
Cost Assignment
Name the 2 types of cost assignment.
Direct Tracing
Allocation
Direct tracing is a cost assignment method used to assign direct costs / indirect costs.
Direct Costs
Allocation is a cost assignment method used to assign direct costs / indirect costs.
Indirect Costs
A cost that can be conveniently and economically traced directly to a cost pool or cost object.
Direct Cost
The cost driver for a direct cost is ...
The number of units of the object
A cost that is not conveniently or economically traceable to a specific cost pool or cost object.
Indirect Cost
If an airline's cost object is an airline passenger, the cost of fuel is a direct cost / indirect cost.
Indirect Cost
If an airline's cost object is a flight, the cost of fuel is a direct cost / indirect cost.
Direct Cost
The cost drivers used to allocate or assign costs to cost objects.
Allocation Bases
The cost of the materials in the product and a reasonable allowance for scrap and detective units (less purchase discounts and including freight and related charges).
Direct Materials Cost
The cost of materials used in manufacturing that are not part of the product or are not easily or economically traceable to the finished product; a component of total manufacturing overhead.
Indirect Materials Cost
The cost of labor used to manufacture the product or provide the service.
Direct Labor Cost
Labor costs associated with production that are not considered direct labor: supervision, quality control, inspection, purchasing and receiving, etc.; a component of total manufacturing overhead.
Indirect Labor Costs
The cost pool into which all the indirect costs are commonly combined.
Overhead / Factory Overhead
The sum of direct materials and direct labor.
Prime Costs
The sum of direct labor and factory overhead.
Conversion Costs
Name the 4 types of cost drivers.
Activity-Based
Volume-Based
Structural
Executional
The range of the cost driver in which the actual value of the cost driver is expected to fall, and for which the relationship between the cost and the cost driver is assumed to be approximately linear.
Relevant Range
Linear approximations of total cost behavior that fall outside of the relevant range can / cannot be used to approximate total cost.
Cannot
Total cost is made up of ____ costs and ____ costs.
Variable
Fixed
A cost that changes in total, both directionally and proportionally, in response to changes in one or more cost drivers.
Variable Cost
