ACC 410 Lecture Notes - Sunk Costs, Enterprise Resource Planning, Cost Driver
Document Summary
Cost categorization (1) relevance (2) behaviour (3) traceability (4) function (5) Controllability: relevance revenues and costs that differentiate between two alternatives that will occur in the future. Relevant: opportunity cost potential benefit given up by not taking one alternative over another. Direct costs cost that can be directly traced to a cost object. Indirect costs incurred for benefit of more than just one object: manufacturing costs include: Prime costs: direct materials and direct labour. Conversion costs: direct labour and manufacturing overhead. Relevant costs for a cost object managers identify one or more cost objects based on the relevant information they need for a particular decision, for budgeting and planning, or for valuing products or services. Identifying relevant costs from the accounting system careful thought and judgement are required to identify relevant costs; however, it helps to know whether costs are direct or indirect.