MGT223H5 Lecture Notes - Lecture 2: Variable Cost, Indirect Costs, Sunk Costs
Document Summary
Lecture 2 - cost terms, concepts, and classi cations cost behaviour: analysis and use (chapter 2 & 6) ! Direct/indirect costs? car - wheels (direct material), direct labour (workers) ! Indirect - glue, carbon dioxide taxes, testing for car, screws ! Examples: indirect materials (wages paid to employees who are not directly involved in production work) and indirect labour (materials used to support the production processes ~ cleaning supplies for the assembly line). Direct - fabric, leather parts, buckles; direct labour: people who are working on putting the purses together ! Conversion cost: are the combination of ! direct labor costs plus manufacturing ! overhead costs. You can think of ! conversion costs as the manufacturing or ! production costs necessary to convert raw ! materials into products. Manufacturing overhead product cost costs include direct materials, direct labour, and manufacturing overhead.
