ACC 406 Lecture Notes - Lecture 1: Indirect Costs, Fixed Cost, Variable Cost

• School: Ryerson University
• Department: Accounting
• Course: ACC 406
• Professor: Anthony Chan

Document Summary

Items for which costs are measured and assigned to products, customers, departments and regions. Assigning costs to a cost object tells the company why the money was spent. Let"s say the telephone expense was incurred by the sales department and the manufacturing department so the sales and manufacturing departments are the cost objects. Costs are classified according to the decision-making needs od management. Direct costs are traceable but indirect costs are not traceable so these costs are to be allocated/assigned. Variable cost: increases in total as output increases and decreases in total as output decreases. Fixed cost: total does not increase as output increases and does not decrease as output decreases. Mixed cost: increases in total as output increases and decreases in total as output decreases. Part of final product, directly traced to goods and services produced. Cost of the electronic components in a television, tires of a airplane: direct labour. Directly traced to goods or services being produced.