# Term Definition
1 Cost Driver
Any factor that has the effect of
changing the level of total cost
2 When does a firm incur a cost? When it uses a resource for some purpose
3 Cost pools
When costs are collected into
meaningful groups (can be done in
several different ways)
4 Direct costs
Are direct or indirect costs
economically traced to a cost object or
pool?
5 How are indirect costs traced? Using cost drivers
6 Cost Allocation
A form of cost assignment used when
direct tracing is not possible
7 What types of cost drivers exist? Activity-based and volume-based
8 Activity-based cost drivers
Identified by using activity analysis, a
detailed description of the specific
activities performed in the firm's
operations.
9 Volume-based cost driver
The number of units of output for the
product or service
, 10 Variable costs
Change in total cost associated with
each change in the quantity of the cost
driver.
11 Fixed costs
The portion of the total cost that does
not change with a change in the
quantity of the cost driver within the
relevant range.
12 Mixed costs
When the total cost includes both
variable and fixed components
# Term Definition
13 Product costs for a manufacturing firm
Include only the costs necessary
to complete the product (DL, DM, OH)
14 Product costs for a merchandising firm
Include the cost to purchase the
product plus the transportation costs
15 Period costs
All other expenditures for managing
the firm and selling the product
(expensed the period they incurred)
16 Steps involved in the cost flow for a
1. Purchase materials 2. DM, DL, and OH added to WIP 3.
manufacturing firm
Production costs are transferred to the FG inventory and
then to COGS.
17 Steps involved in cost flow for a
merchandising firm 1. Purchase goods 2. Place in product inventory account
Once sold transferred to COGS. Inventory accounts=
Materials inventory, WIP, FG
18 Product costing
The process of accumulating,
classifying, and assigning DM,
DL, OH to products or services.
1 Cost Driver
Any factor that has the effect of
changing the level of total cost
2 When does a firm incur a cost? When it uses a resource for some purpose
3 Cost pools
When costs are collected into
meaningful groups (can be done in
several different ways)
4 Direct costs
Are direct or indirect costs
economically traced to a cost object or
pool?
5 How are indirect costs traced? Using cost drivers
6 Cost Allocation
A form of cost assignment used when
direct tracing is not possible
7 What types of cost drivers exist? Activity-based and volume-based
8 Activity-based cost drivers
Identified by using activity analysis, a
detailed description of the specific
activities performed in the firm's
operations.
9 Volume-based cost driver
The number of units of output for the
product or service
, 10 Variable costs
Change in total cost associated with
each change in the quantity of the cost
driver.
11 Fixed costs
The portion of the total cost that does
not change with a change in the
quantity of the cost driver within the
relevant range.
12 Mixed costs
When the total cost includes both
variable and fixed components
# Term Definition
13 Product costs for a manufacturing firm
Include only the costs necessary
to complete the product (DL, DM, OH)
14 Product costs for a merchandising firm
Include the cost to purchase the
product plus the transportation costs
15 Period costs
All other expenditures for managing
the firm and selling the product
(expensed the period they incurred)
16 Steps involved in the cost flow for a
1. Purchase materials 2. DM, DL, and OH added to WIP 3.
manufacturing firm
Production costs are transferred to the FG inventory and
then to COGS.
17 Steps involved in cost flow for a
merchandising firm 1. Purchase goods 2. Place in product inventory account
Once sold transferred to COGS. Inventory accounts=
Materials inventory, WIP, FG
18 Product costing
The process of accumulating,
classifying, and assigning DM,
DL, OH to products or services.
