COSTS LET’S EXPLAIN THEM COSTS Refers to the price Cost accounting will a business will pay become a base for to purchase a both financial and product which they management would like to sell. accounting. Cost also includes Costs are incurred other expenses in service firms, associated with merchandising selling that firma, and in particular product. manufacturing firms. THE CATEGORIES MANUFACTURING NON-MANUFACTURING LABOUR OPPORTUNITY COSTS SUNK COSTS MANUFACTURING COSTS Appliedto Applied to raw direct material material NON-MANUFACTURING COSTS Marketing or Administrative costs: selling costs: include all the costs that cannot be include all costs directly included in needed to get the manufacturing costs or product into the in marketing or selling hands of the costs. customer! Serve the whole organization not just manufacturing! LABOUR COSTS There are two Direct Labor Costs: types: direct labor, factory-worker and overhead salaries, costs.(could be accountant wages referred to as Overhead(Indirect conversation costs) Labor)Costs: janitors, maintenance workers NOTE!!! As of right now For management to direct costs are be effective, they decreasing, but have to understand overhead costs are labor costs because increasing. if poor decisions are made, these costs will definitely be higher than necessary. OPPORTUNITY COSTS It is the cost of These costs are rejecting one not entered into alternative for the accounting another. records, but they are an integral part of a manager’s decision making process. SUNK COSTS It is a cost previously incurred and which would not be considered in a management situation.(because it cannot be recaptured or decreased.) THE END!!
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