[ACC 310F] - Midterm Exam Guide - Comprehensive Notes for the exam (29 pages long!)
Document Summary
Organizations frequently refer to indirect costs as common costs and to indirect manufacturing costs as manufacturing overhead. Is the degree to which we can directly relate a cost or revenue to a decision option. A cost or revenue that we can uniquely relate (trace) to a decision option is a direct cost or direct benefit. Ex. new model of refrigerator, direct benefit is revenue from sales of new refrigerator. If only a portion of the cost or revenue pertains to a particular decision option, then it is an indirect cost or an indirect benefit. Ex. indirect result: buyers might be more likely to purchase other appliances from this company in the future, thereby increasing overall revenue. A direct cost can be fixed or variable. Ex. the cost of a machine used only for manufacturing this refrigerator is a fixed, direct cost. The cost of raw materials is a variable, direct cost. Indirect costs can also be fixed or variable.
