ACCOUNTG 331 Lecture Notes - Lecture 2: Whole-Life Cost, Cost Accounting, Variable Cost
21 Feb 2017
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Life cycle costing method used to identify and monitor the total cost of a product or service throughout its life: cost management traditionally focuses on manufacturing cost, one component of the value chain. Classification of cost: direct and indirect, variable and fixed, relevant and irrelevant, product and period, prime and conversion. Cost an economic resource sacrificed to achieve a goal: inventoriable cost = product cost, direct cost - can be easily and conveniently traced to a product or cost object. Steel used to manufacture a car; tires, windows, steering wheel, seats. Direct labor people manufacturing and assembling the car are paid wages; that is a direct cost: indirect cost cannot be easily and conveniently traced to a cost object. On a boeing: tens of thousands of small pins and nails. Indirect labor production managers, supervisors, security guards, and people who maintain equipment of production plant are paid wages; those are indirect costs.
