Essay About Cost Object And Direct Costs

Accounting – Cost Object Measures Cost
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Acct:Cost object: measures cost (anything to which you can assign a cost)Certain customers drive more profit than others Acquiring costs Direct costs: easily traced to a cost objectAluminum used to produce product Indirect costs: not easily traced to cost objectFactory manager’s salary Product costs: manufacturing costs capitalized to company’s inventory account Expensed through COGS when inventory is sold 3 types of product costs: Direct Materials: The raw materials used to create the product Direct LaborLabor that built the product (touch labor) Some companies don’t include overtime- moved to manufacturing/overheadManufacturing overheadAll other manufacturing costs (indirect materials, indirect labor, insurance utility etc)Technology= direct labor cost decreases and manufacturing overhead increases Period cost: do not pertain to manufacturing and are not capitalized to the company’s inventory accountExpensed as they are incurredSelling costs/administrative costs Prime cost = direct materials + direct laborConversion cost = direct labor + manufacturing overhead Raw materials-> WIP -> finished goods inventory (once sold=COGS)