Chapter 1, 2 & 3 Feedback
Chapter 1 describes the Cost Accounting overview. Basic cost terminology is cost-
sacrificed resource to achieve a specific objective; actual cost- a cost that has occurred; budgeted
cost-a predicted cost; cost object- anything of interest for which a cost is desired.
Chapter 2 describes Cost Terms and Purposes. Some of the terminology includes cost
accumulation- a collection of cost data in an organized manner. Cost assignment- a general term
that includes gathering accumulated costs to a cost object. That includes: tracing accumulated
costs with a direct relationship to the cost object, and allocating accumulated costs with an
indirect relationship to a cost object. Some examples of direct costs are: parts, assembly line
wages. Indirect costs are electricity, rent, and property taxes.
Two of the factors of cost behavior are variable costs which are constant on a per-unit
basis. An example is electric bill or a phone bill. The other is fixed costs which change
inversely with the level of production. As more units are produced, the same fixed cost is spread
over more and more units which reduce the cost per unit. An example is rent.
Other cost concepts are cost driver and relevant range. A cost caveat is that unit costs
predictions about the future; 4) make decisions by choosing between alternatives using cost-
volume-profit (CVP) analysis; 5) implement the decision, evaluate performance, and learn.