Managerial Accounting GOAT EXAM 1 ACT 2123

Fixed Cost

A cost that remains constant, in total, regardless of changes in the level of the activity.

Variable Cost

A cost that varies, in total, in direct proportion to changes in the level of activity.

Direct Labor

Are those labor costs that can be easily traced to individual units of product.

Administrative Costs

all executive, organizational, and clerical costs

Differential Cost

are the difference in cost between any two alternatives.

Product Costs

include direct materials, direct labor, and manufacturing overhead.

Direct Materials

raw materials that become an integral part of the product and that can be conveniently traced directly to it.

opportunity cost

The potential benefit that is given up when one alternative is selected over another.

Finished Goods

Consists of completed units of product that have not yet been sold to customers.

Work in process

Consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer.

Direct Material and Manufacturing Overhead

Conversion Costs

Direct Costs

Costs that can be easily and conveniently traced to a unit of product or other cost object.

Indirect Costs

Costs that cannot be easily and conveniently traced to a unit of product or other cost object.

Direct Costs Example

Direct materials and direct labor

Period Costs

Include all selling costs and administrative costs.

Manufacturing Overhead

Includes all manufacturing costs except direct material and direct labor. These costs cannot be readily traced to finished products.

raw materials

Includes any materials that go into the final product.

Common Costs

Indirect costs incurred to support a number of cost objects. These costs cannot be traced to any individual cost object.

Indirect Costs Example

Manufacturing Overhead

Direct Material and Direct Labor

Prime Costs

Sunk Cost

costs have already been incurred and cannot be changed now or in the future.

Selling Costs

costs necessary to secure the order and deliver the product