ACTG 2011 Lecture Notes - Lecture 2: Sunk Costs, Opportunity Cost

• School: York University
• Department: Accounting
• Course: ACTG 2011
• Professor: Lawrence Shum

Document Summary

Cost- measure by money given up to acquire goods/services. Function: manufacturing cost- factory costs, nonmanufacturing cost- selling/administrative cost. Traceable: direct cost- clear/convenience to cost object & variable, indirect cost- cost not traced to cost object. Inventorially: period- expense incurred during period (rent: pay partial as time goes, product cost- assets cost incurred. Product cost (manufacturing cost: direct material- raw material goes into final product/conveniently traced (steak on plate, direct labour- time spent by workers on product (indirect: janitors/supervisors, manufacturing overhead- indirect cost (expenses: rent/utilities) Indirect material- small items nails/glue (skid that carries fridge is overhead, not material as not part of the fridge) Overtime- if job specific reason (direct) or mgmt decision as production needed (overhead) Employee benefits- payroll taxes/pension (overhead: prime cost = direct material + direct labour cost, conversion cost = direct labour + overhead (converts raw material to finish products) Total cost = cost per unit x # of units.