Concept explainers
(a)
Direct cost:
A cost indicates the payment of cash or the obligation to pay the cash in the future period for the generation of revenue or the service performed. A direct cost is the cost which is directly involved in the process of production. For example: The cost of plastic is the direct material for manufacturing a bottle.
Indirect cost:
An indirect cost is the cost which is indirectly involved in the process of production. For example: The salary of supervisor of a manufacturing business cannot be traced even though the supervisor contributes for the production.
Cost object:
A cost object is something to which costs are assigned, it is often a product lines or customers department for which costs are accumulated or measured by the management.
To explain: The most logical definition for the final cost object.
(b)
To classify: Each cost as either direct cost or indirect cost.
Want to see the full answer?
Check out a sample textbook solutionChapter 15 Solutions
Financial and Managerial Accounting - With CengageNow
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education