MA garrison
c1 managerial accounting and concepts
lo
-understand cost classifications used for assigning costs to cost objects; direct costs and indirect costs

-identify and give examples of each of the three basic manufacturing cost categories

-understand cost classifications used to prepare financial statements: product costs and period cost

-understand cost classifications used to predict cost behavior: variable cost, fixed costs, and,mixed costs

-understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs

-prepare income statements for a merchandising company using the tradtional and contribution formats

-identify the four types of quality costs and explain how they interact

-prepare and interpret a quality cost report

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1.1
a cost object is anything for which cost data are desired/ or anything for which a separate measurement of cost is desired

direct cost- a cost that can be easily and conveniently traced to a specified cost object

indirect cost-******** not *****
common cost- a cost that is incurred to support a number of number of cost objects but cannot be traced back to them individually
**direct oe indirect depending on the cost object

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1.2
manufacturing costs

direct materials
direct labor
-the sum is prime cost

manufacturing overhead
-indirect labor
-indirect material
-indirect costs associated with  manufacturing operations

- -conversion cost : sum of direct labor and manufacturing overhead

Nonmanufacturing costs
selling costs- all costs that are incurred to secure customer orders and get the finished product to the customer

administrative costs- all costs associated with the general management of an organization rather than with manufacturing or selling

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1.3 cost classifications for peeparing financial statements

product costs-- include all costs involved in acquring or making a product
-- when units of product are sold, their costs are released from inventory as expenses--product cost. aka inventoriable costs

-raw materials, work in process, finished goods

period costs- all the costs that are not product costs

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1.4 cost classifications for predicting cost behavior

cost behavior refers to how a cost reacts to changes in the level of activity
-cost structure--  the relative proportion of each type of cost in an organization

variable cost
a variable cost varies, in total, in direct proportion to changes in the level of activity
- variable with activity base - sometimes refer to cost driver
an activity base-- a measure of whatever causes the incurrence of a variable cost

fixed cost
a fixed cost is a cost remains constant, in total, regardless of changes in the level of activity
for planning purposes, -commited or discretionary

the linearity assumption and relevant range
- management accountants ordinarily assume that costs are strictly linear
- relevant range is the range of activity within which the assumption that cost behavior is strictly linear is reasonably valid

mixed costs-aka semivariable costs
Y = a + bX
a- total fixed. b- variable per unit x - activity Level

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1.5 cost classifications for decision making