Essay about Boring Cost Terms

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Boring Cost Terms (But necessary!)
Cost object – Anything for which a separate cost is desired!
Cost accumulation – collection of cost data in an organized way through the accounting system.
Cost assignment – general term related to how accumulated costs are assigned to cost objects. Done in 2 ways:
(1)
assigning accumulated costs to a cost object
(2)
allocating accumulated costs to a cost object
Direct cost – cost related to a cost object and can be traced in an economically feasible manner
Indirect cost – cost related to a cost object but cannot be traced in an economically feasible way. Indirect costs are allocated to a cost object using some method of allocation. This involves a mathematical proration of some type!
How do we decide if we are going to trace a cost directly to a cost object? It depends on: a) size of the cost
b) available technology
c) design of operations
d) contractual arrangements.
Note: If cost not traced directly, then cost will be totaled and allocated (likely at the end of a month) to the cost object. Thus, it is an indirect cost.

Boring “Inventory” Specific Cost Terms
Inventoriable cost – all costs of a product that are regarded as an asset (inventory) when they are incurred. These costs will then become cost of goods sold when the product is sold. Generally, there are 3 components of any item that is manufactured:
1) Direct materials(DM) (or “raw” materials) costs
2) Direct (manufacturing) labour costs (DL)
3) Factory (Manufacturing) overhead (indirect manufacturing costs) (FOH)
Period cost – these are your operating costs (expenses on the income statement) other than cost of goods sold!
In the

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