AFA 200 Lecture Notes - Lecture 1: Indirect Costs, Fixed Cost

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13 Jun 2016
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Materials: sugar, water, aluminum, machinery, factory building, delivery vehicles. Labour: production line workers, factory supervisor, sales manager, finance director. Other expenses: electricity, insurance, royalty, utilities: by traceability: how easily to link each cost to the production of product. Direct costs: can be easily link to each unit of product (know accurately how much material to produce a unit of product) Indirect costs: cannot be easily link to each unit of product (electricity, insurance) Direct: sugar, water, aluminum, production line workers, royalty. Indirect: machinery, factory building, delivery vehicle, factory supervisor, sales manager, finance director, electricity, insurance, utilities: production / non-production costs. Production: must be incurred in order to produce unit or provide service. Non-production: costs which are not necessary for production of product (distribution costs, selling costs, finance costs, admin costs: by behaviour. *cost does change based on level of activity number of units produced or sold.

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