RSM222H1 Lecture 2: Class 2
12 Feb 2017
School
Department
Course
Professor
Document Summary
Cost classifications different types of cost due to different types of decision making. Assigning costs to cost objects (traceability: direct vs indirect. Opportunity cost: potential benefit that is given up when one alternative is selected over another. Sunk cost: cost that has already been incurred and that cannot be changed by any decision made now or in future. Sunk costs does not matter, differential and opportunity cost matters but opportunity cost does not show up on financial statements. When looking at benefits, look at other factors too. Costs that can be directly traced (in a cost-effective manner) to a cost object. Costs that cannot be directly traced (in a cost-effective manner) to a cost object. Indirect labour or materials and others (overhead costs includes all indirect) Manufacturing costs that cannot be easily traced directly to specific units produced. Includes indirect materials, depreciation on manufacturing assets, indirect labour, factory utilities, rent on manufacturing facilities.
