ch02 - 2-1 CHAPTER Basic Management Accounting Concepts...

Info icon This preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
2 -1 Basic Basic Management Management Accounting Accounting Concepts Concepts CHAPTER CHAPTER
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 -2 1. Describe the cost assignment process. 1. Define tangible and intangible products and explain why there are different product cost definitions. 1. Prepare income statements for manufacturing and service organizations. 1. Outline the differences between functional- based and activity-based management accounting systems. Objectives Objectives After studying this After studying this chapter, you should chapter, you should be able to: be able to:
Image of page 2
2 -3 Exactly what is meant by “cost”? 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. I see… It’s a dollar measure of the resources used to achieve a given benefit.
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 -4 A cost object cost object is any item such as products, customers, departments, projects, activities, and so on, for which costs are measured and assigned. Example Example: A bicycle is a cost object when you are determining the cost to produce a bicycle. An activity activity is a basic unit of work performed within an organization. Example: Example: Setting up equipment, moving materials, maintaining equipment, designing products, etc.
Image of page 4
2 -5 Traceability Traceability is the ability to assign a cost to a cost object in an economically feasible way by means of a cause-and-effect relationship. Direct costs Direct costs are those costs that can be easily and accurately traced to a cost object. Example: Example: If a hospital is the cost object, the cost of heating and cooling the hospital is a direct cost.
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 -6 Indirect costs Indirect costs are those costs that cannot be easily and accurately traced to a cost object. Example: Example: The salary of a plant manager, where departments within the plant are defined as the cost objects.
Image of page 6
2 -7 Tracing Tracing is the actual assignment of costs to a cost object using an observable measure of the resources consumed by the cost object. Tracing costs to cost objects can occur in the following two ways:
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern