ADMS 2510 Lecture Notes - Lecture 1: Cost Driver, Fixed Cost, Variable Cost

• School: York University
• Department: Administrative Studies
• Course: ADMS 2510
• Professor: Marcela Porporato

Document Summary

Profitability is determined by 2 items: cost and sales. Cost: monetary measure of resources given up to acquire good. Cost object: anything to which costs attach/ related. Cost driver: factor having direct causative relation to cost. Factory costs: costs incurred in operation of factory. Cost associated with making/ acquiring (inventory, assets) Direct cost: cost clearly, conveniently and economically traceable to particular cost object. Indirect cost: cost not traced to particular cost object. Cost allocation: assigning indirect costs to cost objects using: cost driver/predictor and arbitrary method. Though technically we could trace it, it may not be convenient to. Time spent by workers directly on manufacturing product. Prime cost: combining direct materials and direct labour together. Conversion cost: direct labour and overhead costs combined. Called conversion because it"s the cost incurred by converting. Manner in which cost responds to change in related level of activity. Activity measure accompanied by consistent and observable change in cost item.