Accounting Chapter 1
General and administrative costs
All executive, organizational, and clerical costs
Conversion cost
Cost that consists of direct labor and manufacturing overhead
Prime cost
Cost that consists of direct materials and direct labor
Relevant Cost
Cost that has the potential to influence a decision (must be a cost incurred in the future)
Irrelevant cost
Cost that won't influence the decision
Marketing or selling costs
Costs necessary to get the order and deliver the product
Direct costs
Costs that can be easily and conveniently traced to a unit of project or other cost object (i.e. materials and labor)
Indirect costs
Costs that cannot be easily and conveniently traced to a unit of product or other cost object (i.e. depreciation on equipment, utilities, advertising, etc.)
Variable costs
Costs that change in total in direct proportion to changes in activity level
Fixed costs
Costs that do not change in total regardless of the activity level
Nonmanufacturing costs
Costs that include marketing or selling costs and general and administrative costs
Out-of-pocket costs
Costs that involve an actual outlay of cash
Sunk costs
Costs that were incurred in the past
Manufacturing costs
Include all costs incurred to produce the physical product (includes Direct materials, direct labor, and manufacturing overhead)
Manufacturing overhead
Includes all costs other than direct materials and direct labor that must be incurred to manufacture a product (i.e. repairs, utilities, salaries, insurance, taxes, etc)
Direct materials
Major material inputs that can be physically and conveniently traced directly to the final product
Direct labor
The cost of labor that can be physically and conveniently traced to the final product
Opportunity cost
The foregone benefit of the path not taken