ACTG 4400 Chapter Notes - Chapter 2: Straight Time, Activity-Based Costing, Cost Driver
1 Nov 2016
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Chapter 2: introduction to cost terms & purposes. Costs are critical element in most business and managerial decisions. Not all costs can be traced to products in cost-effective way. Company only be profitable if it recovers its full costs: every $ in cost reduction is one more $ in operating income. Cost: a resource sacrificed or foregone to achieve a specific objective: usually measured as a monetary amount that must be paid. Actual cost: cost incurred (historical or past cost) Budgeted cost: predicted or forecasted cost (future cost) Cost object: anything for which a measurement of cost is desired/for which cost info is accumulated. Cost accumulation: collection of actual cost data in an organized way: accumulated costs referred to as cost pools, can include costs from different transactions, ex. raw material, labor, equipment use, supervision for cost object. Direct costs: are related to the distinct cost object and can be traced to it: use paper trails, invoices, data system etc.
