Accounting Ch14

Accounting Ch14 - Chapter 14: Cost Planning Budgeting is...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 14: Cost Planning Budgeting is the process of financial planning. A standard cost is a unit budget allowance for a single component – material, labor, or overhead – of a product or service. Raw materials and direct labor are variable costs that increase or decrease in total with the volume of activity but remain constant when expressed on a per unit basis. Costs such as property taxes, executive salaries, and plant depreciation will not change with plans for sales and related production requirements because these items represent fixed costs. Mixed costs are costs having both fixed and variable elements. Fixed costs classified according to a time frame perspective are known as committed costs and discretionary costs. A committed cost is one that will be incurred to execute long-range policy decisions to which the firm has “committed.” Collectively, these committed cost investments provide the organization with the capacity resources necessary to carry out the basic activities along its value chain. A discretionary cost is one that can be adjusted in the short run as management evaluates the
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/02/2011 for the course ACCT 502 taught by Professor Jaggi during the Fall '10 term at Rutgers.

Page1 / 2

Accounting Ch14 - Chapter 14: Cost Planning Budgeting is...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online