ACCT 2301 Chapter Notes - Chapter 4: Cost Driver, Indirect Costs, Financial Statement
16 Dec 2016
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Cost accumulation: measuring the cost of a particular object by combining many individual costs into a single total cost. Cost objects: items for which managers need to measure cost; can be products, processes, departments, services, activities, and so on. Cost driver: any factor, usually a volume measure that causes cost to be incurred; sometimes described as activity base or allocation base. Changes in cost drivers, such as labor hours or machine hours cause corresponding changes in cost: ex: units produced, miles driven, machine hours, labor hours. Accumulated cost = minutes talked (cost driver) x rate per minute. The relationship between the number of long-distance minutes that you talk and your long distance telephone bill provides us with another common cost driver. For example, if your long distance plan charges five cents per minute, then your total accumulated long distance bill is equal to five cents times the number of minutes that you talk.
