The Meaning of Cost Accounting

On the other hand, direct costs represent labor, materials, equipment, and sometimes subcontractors. They are assigned directly to a work package and activity. When project durations are imposed, such as in the racing sailboat project, direct costs may no longer represent low-cost, efficient methods. As detailed in the crash cost list, costs for the imposed duration date will be higher than for a project duration developed from ideal normal times for

Direct labor assembly costs are, by their nature, directly traceable to individual products. Therefore the relevant cost driver for this cost is the number of Direct Assembly Labor Hours. The other 21 cost categories are indirect costs.

However the trading account is used to see whether the material costs and direct expenses are covered or not. Material costs means the price of the items used to produce the goods for the sale. Direct Expenses means the expenses are linked to the production to make the goods for a profitable purpose. In the trading, profit and loss account for smiths the material costs are motor expenses which are £9,622 while the direct expenses is Electricity which costs £7,400.

The following annotated bibliography includes a list of references that address cost measures, direct and indirect costs and pricing systems. Cost accounting systems are well-developed for tangible goods. Accounting principles are applied to businesses for financial reporting to analyze the profitability of the business. Direct and indirect costs is the basis to setting regulated prices on products.

Direct costs are those that can be identified specifically with a particular final cost objective are charged to a program/grant directly:

This is because even when the company is not producing any output, it pays the rent, security and the wedges for the permanently employed workers. The direct costs are those that are in direct concern with the production of the output like the cost of the raw material, direct labor and the containers. These costs will change directly proportional to the volumes of the output (Kukla, 2012).

price v. indirect costs such as: training and relocation costs. One could see it beneficial to also contemplate about costs the initial costs equally obvious direct in addition to indirect

Included in cost allocation are direct, indirect, and incremental costs. Direct costs, or separable costs, are costs that are related to a single type of service and are related to one type of output or user such as, a sector-to-sector hand-off. Indirect costs, or common costs, are related to more than one type of service, such as, the physical en-route facility. Incremental costs change with the level of

Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $525,000

Variable costs: Costs that vary with the quantity produced or sold e.g. costs of materials and wages

As well as something that doesn’t change in regards to output. A car manufacturer has to pay heating bills whether it sells one car a day or a hundred. Fixed costs are also called indirect costs. Though, variable costs are called direct costs. This is because they are incurred once a business is operating. This time the amount spent directly relates to the number of products sold or the amount of

A direct cost can be traced to a product or service which includes: Direct labor- which is the cost of the labor that’s directly connected to a product or services. Direct labor is sometimes called touch labor, since direct labor workers typically touch the product while it is being made.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 39-40) An example of direct labor is an assembly line worker. Labor cost that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience, are considered to be indirect labot.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 40) Direct material are those materials that become an integral part of the finished product and whose cost can be traced to the finished product.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p39-40) Manufacturing overhead is the third element so manufacturing cost, it includes all costs of manufacturing except direct materials and direct labor. Manufacturing overhead includes items such as indirect materials; indirect labor; maintenance and repairs on production equipment; and heat and light, property taxes, depreciation, and insurance on manufacturing facilities. Only cost associated with operating the factory are consider to be manufacturing overhead cost. A company also incurs other costs associated with its selling administive functions, but these costs are not included as part of manufacturing overhead. Only those

Indirect costs that could not be traced back directly to the income statement were then assigned to cost pools by activity. The cost for each activity were then divided by the total volume of the cost driver and assigned to the cost objectives.

Direct costs are costs directly related to producing the products and services of a project. On the other hand, indirect costs are costs not directly related to a project’s products or services, but are indirectly related to performing the project.

Indirect costs encompassed about 20% of the direct costs and covered items such as making release prints, marketing, advertising and distribution. In today 's film independent based industry, costs are based around the three stages of production: preproduction, production and postproduction. Further costs incurred can vary based on whether non-union or union labor is used. (Barsam & Monahan 2016)