ACC2200 ASSIGNMENT.docx - Cost Classification 1.Direct cost...

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Cost Classification1.Direct cost- can be traced to a cost object in an economic manner-There is clear and observable relationship between the cost and the cost object(1)Direct manufacturing costsDirect material:--Physically incorporated into the finished products--Can be traced to products in an economic manner --A variable cost Direct labour:--The cost of wages and labour on-costs for personnel who work directlyon themanufacture of a product--On-costs include payroll tax, insurance, superannuation etc.2.Indirect cost– cannot be traced to the cost object in an economic manner-Because the cost has no direct relationship with the cost object, it has to beapportioned or allocatedManufacturing overhead....or indirect manufacturing costs or factory burdenEg. indirect material, indirect labour, depreciation, insurance on factoryequipment,Utilities, manufacturing support department costs, overtime, idle timeCost approach1)Job order costingManufacturing costs traced to individual jobsJob costing systems accumulate the costs of each jobProducts produced are significantly different and may be produced in distinctjobs/batchesUsed by printers, furniture manufacturers, machinery manufacturers
Pros - Job costing tracks costs against a specific job or project. Job costs can then be controlled bycomparing actual results with estimates for that job or other similar jobs.

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