Basic Cost Management Concepts
After studying this chapter, you should be able to:
1. Describe a cost management information system, its objectives and major subsystems,
and indicate how it relates to other operating and info
Cost poola grouping of individual cost items.
Cost tracingthe assigning of direct costs to the chosen cost object.
Cost allocationthe assigning of indirect costs to the chosen cost object.
Cost-allocation basea factor that links
ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT
Broad averaging (or peanut-butter costing) describes a costing approach that uses broad
averages for assigning (or spreading, as in spreading peanut butter) the cost of resources
17-1 Industries using process costing in their manufacturing area include chemical processing,
oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,
beverages, and breakfast cereals.
Cost of Goods Manufactured
Calculating the Supporting
Supporting Schedule for COGS
Like all merchandisers, a manufacturers COGS is the
single most important item on the income statement.
For a manufacturer, the most important component of