Cost
- Tags
- finance
Is a resource sacrificed or foregone to achieve a specific objective.[see page 4, costing] is the gathering of cost information and it's attachment to cost objects.
Costs can be [see page 5, classified] by:
| Class | Meaning |
|---|---|
| Function | Organisational functions (eg. production, marketing etc.) |
| Element | Why incur a cost? (eg. Buying raw materials. paying for labour). |
| Nature | Direct vs Indirect cost. |
| Behaviour | Fixed or variable/marginal cost. |
See [see page 11, product and period] cost.
Note: product costs should be related to production, not administration and distribution costs.
Direct vs Indirect
Direct costs - costs that are directly related to a given cost object (product,
department, etc.) and that can be traced to it `in an economically feasible way`.
Indirect costs - costs related to a cost object but cannot be traced to it directly.
They contribute to a product but cannot be isolated to a single product but is
instead used in multiple ones (eg. production grease in creating a cake).
Subdefinitions
Product Costs - [see page 10, Attached] to a product and included in stock/inventory valuation (eg. Raw material, labour, production overhead).
Period costs (non-manufacturing costs) - Not attached to a product (eg. marketing).
[see page 13, Prime Costs] - The sum of all direct costs.
Product Costs - Prime Costs + indirect production costs.