ACCT2112 Chapter Notes - Chapter 2 Part 1: Cost Driver, Management Accounting
Document Summary
Lo objectives: define and illustrate a cost object, distinguish between direct costs and indirect costs, the concepts of cost drivers and relevant range, cost behaviour patterns: variable costs and fixed costs, prime costs and conversion costs. Defined as resources sacrificed or foregone, usually measured in monetary terms, to achieve a specific cost object. An activity or thing for which we want to know the cost information. Information on cost associated with the cost object facilitates decisions. What price should be charged for the product or service. Which department uses its resources most efficiently. Collection of cost information in some organized way by means of an accounting system. Tracing accumulated costs to a cost object. Allocating accumulated costs to a cost object. Direct: readily traceable - trace in an economically feasible (cost effective) way. Indirect: not readily traceable - cannot be traced in an economically feasible (cost effective) way.
