COMMERCE 2AB3 Study Guide - Final Guide: Cost Driver, Indirect Costs, European Cooperation In Science And Technology

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2AB3
• Professor: Karim Karim

Document Summary

Indirect costs are costs that cannot be traced to cost objects in an economically feasible way. To motivate engineers to design simpler products, costs for production, distribution, and customer service may be included in product-cost estimates. For external reporting, inventoriable costs under gaap sometimes include r&d costs. Under gaap, inventoriable costs include only the costs of producing and sometimes the design costs of the product. Today, companies are simplifying their cost systems and moving toward less-detailed and less-complex cost allocation bases. Companies are moving toward more-detailed and more-complex cost allocations because today technology can capture these costs in a relatively inexpensive manner. Difficulty: 3: when using the cause-and-effect criterion, cost drivers are selected as the cost allocation bases. The ability-to-bear criterion is considered superior when the purpose of cost allocation is motivation. The cause-and-effect or benefits-received criteria is considered superior when the purpose of cost allocation is motivation.