Basic Management Accounting Concept

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Cost definition

Cost is the cash or cash-equivalent value sacrificed for goods and services that is expected to bring a current or future benefit to the organization.

Opportunity Cost definition

Opportunity cost is the benefit given up or sacrificed when one alternative is chosen over another.

Cost Object definition

A cost object is any item such as product, customer, project, activity & so on, to which costs are measured and assigned.

Cost Assignment
Cause & effect relationship when assigning costs to cost objects

• Direct costs are easily traceable
• Indirect costs not so easily traceable

 And 3 ways to assigning produk cost

1. Direct tracing
2. Driver tracing
3. Inderect cost  

Differences

Services differ from products on 4 dimensions :
1. Intangibility
2. Perishability
3. Inseparability
4. Heterogeneity

 
Product Cost
Product cost include :
1. Direct Material = Trecable to good, services produced
2. Direct Labor = Trecable to good, services produced
3. Overhead = All other production cost

What is “cost of goods manufactured?”

Cost of goods manufactured” is the total of production costs (direct materials & labor & overhead) for the period.

How does an FBM system differ from an ABM system?

FBM & ABM systems differ in the ways they assign costs and how they assign responsibility for efficient operations.

Comparing FBM and ABM

(From Hansen & Mowen Book)