Cost Accounting Fundamentals Module 1

Direct costs are directly related to the creation of a product and can be directly associated with that product, whereas indirect costs are not directly linked to a specific product.

Direct costs influence the product's price as they are calculated per project or unit, directly affecting the final cost of the product.

Indirect costs impact the entire business since they are calculated monthly or annually, affecting the overall operational expenses.

<p>Direct costs are highly variable mainly due to market factors.</p> Signup and view all the answers

<p>Direct costs include raw materials, manufacturing, and direct labor.</p> Signup and view all the answers

<p>Direct costs are included in the costs of goods sold in the income statement.</p> Signup and view all the answers

<p>Cost accounting focuses on the costs associated with producing goods or services.</p> Signup and view all the answers

<p>Tracking, analyzing, and controlling costs are three key activities.</p> Signup and view all the answers

<p>It provides crucial data that helps managers make informed decisions about production, pricing, and resource allocation.</p> Signup and view all the answers

<p>Salaries, marketing costs, and utilities are examples of expenses.</p> Signup and view all the answers

<p>Cost refers to the monetary value of resources consumed in the production of goods or services.</p> Signup and view all the answers

<p>A direct cost is a cost that can be directly traced to a specific product or service.</p> Signup and view all the answers

<p>Factory rent would be considered an indirect cost, as it cannot be directly traced to a specific product or service.</p> Signup and view all the answers

<p>Costs are tracked at various stages, including production, distribution, and administration.</p> Signup and view all the answers

<p>Knowing how costs behave in relation to changes in production volume is essential for accurate cost forecasting and decision-making.</p> Signup and view all the answers

<p>It provides insights into where costs are incurred, allowing companies to identify areas for cost reduction and efficiency improvements.</p> Signup and view all the answers

<p>Depreciation is an example of an indirect cost that is also considered overhead.</p> Signup and view all the answers

<p>Overhead costs are a specific type of indirect cost that is associated with production.</p> Signup and view all the answers

<p>Accurate cost information helps companies determine appropriate selling prices to cover production costs and generate a profit margin.</p> Signup and view all the answers

<p>Raw materials used in a specific product are an example of a direct cost.</p> Signup and view all the answers

<p>Distinguishing between direct and indirect costs is important for accurate cost accounting and pricing decisions.</p> Signup and view all the answers

<p>Cost accounting helps businesses determine the cost of producing goods or services, which is essential for setting profitable prices.</p> Signup and view all the answers

<p>By analyzing costs, businesses can identify areas where they can reduce expenses, leading to improved efficiency and profitability.</p> Signup and view all the answers

<p>Cost accounting can track the expenses incurred by different departments, enabling businesses to assess their efficiency and identify areas for improvement.</p> Signup and view all the answers

<p>Cost accounting is useful for planning future costs and resource allocation, as well as for predicting future financial performance.</p> Signup and view all the answers

<p>Cost accounting helps businesses compare the profitability of different products to make informed decisions about which products to prioritize.</p> Signup and view all the answers

<p>Cost accounting helps businesses determine whether it is more cost-effective to manufacture goods internally or outsource production.</p> Signup and view all the answers

<p>Cost accounting helps assess the profitability of capital investments by evaluating costs and potential returns.</p> Signup and view all the answers

<p>Cost accounting can compare direct labor hours to units produced to measure employee productivity and identify areas for improvement.</p> Signup and view all the answers

Identify costs to establish profitable selling prices.

Assess and improve efficiency in operations to reduce costs.

Analyze the effectiveness of departments or processes.

Plan for future costs and resources based on estimates.

Determine the profitability of various product lines.

Decide whether to manufacture in-house or purchase externally.

Assessing the profitability of capital investments before committing funds.

Comparing labor hours spent to units produced for efficiency assessment.

Branch of accounting focusing on production costs and services.

Study of how costs change with levels of activity.

Process of gathering costs incurred in production.

Distributing accumulated costs to cost objects.

Essential terms used in cost accounting.

Value of resources utilized in producing goods/services.

Process of making informed decisions based on cost data.

Total costs incurred in the manufacturing of goods.

Basic materials used in manufacturing a product.

Work performed by employees to produce goods or services.

Cost incurred for using production facility space.

The cost of resources utilized for generating revenue.

Costs that can be traced directly to a specific product or service.

Costs that cannot be traced to a specific product or service.

Indirect costs associated with production.

The reduction in value of an asset over time.

Direct costs are calculated per project or unit; indirect costs are calculated monthly or annually.

Direct costs influence product pricing, while indirect costs affect overall business expenses.

Direct costs are highly variable; indirect costs are relatively stable.

Direct costs are included in the cost of goods sold; indirect costs are part of operational expenses.

Examples include raw materials, manufacturing, and direct labor.

Examples include rents, utilities, insurance, and office expenses.