ACC 2203 Study Linen

 Essay regarding ACC 2203 Study Piece


Managerial Accounting and Cost Concepts

___________________________________________________________________________________ ______

Costs are separated into two teams:

Manufacturing Costs

Nonmanufacturing Costs

Manufacturing Costs:

Direct Components ​

- Materials that go into the last product

Direct Labor -- ​

Labor costs that can be traced in parts of the merchandise

Manufacturing Over head - all manufacturing costs except direct materials/labor​, such as ​


Materials, Indirect Labor, Maintenance and Vehicle repairs on Development Equipment, real estate taxes, depreciation and insurance on manufacturing facilities​

. (​

Costs associated with

selling/administrative expenses are generally not included!!! ​


Nonmanufacturing Costs:

These costs are divided into ​

Selling Costs ​

(cost incurred to obtain customer instructions etc), and

Administrative Costs​

(executive reimbursement, general accounting etc)

___________________________________________________________________________________ ______

Costs can also be categorized as:

Merchandise Costs

Period Costs

Product Costs -​

All costs involved in obtaining or making a product. Direct Materials, Direct Labor, Manufacturing Overhead. These product costs are mounted on each unit until the units are sold, at which point they become ​


, or perhaps ​

cost of goods sold​


Period Costs​

- Every costs which are not product costs. ​

Every selling and admin. expenses are period costs.

(Sales commissions, advertising, executive salaries etc). ​ Period costs are not within the cost of

bought or manufactured goods!!!

Prime Cost ​

= quantity of direct materials + sum of direct labor

Conversion Price = ​

sum of direct supplies + developing overhead

___________________________________________________________________________________ ______

Price Behavior:

Variable Costs​

happen to be costs that vary in direct percentage to changes in the ​ degree of activity.

Direct materials, direct labor, and everything variable portions of overhead/selling/admin expenditures are

changing costs.

Activity Base ​

is the measure of whatever causes the varying cost, often known as a ​ cost driver​



Immediate labor hours, machine several hours, units created, units marketed are more prevalent activity bases) Fixed Costs​

are costs that stay constant regardless of changes in the amount of activity. Even if the activity foundation rises or falls (such units produced), the ​

fixed costs do not difference in regards to the

activity base​

(unless some other force alterations the ​

fixed cost​

. )

IMPORTANT!!! Fixed costs stay constant, so if the level of activity goes up, then this avg fixed cost every unit can be smaller.

By way of example:

Fixed cost - $1, 000

Fixed Cost -- $1, 000

Units offered - 1, 000

Products sold - 2, 000

Average set cost every unit = $1

Average fixed price per unit = $0. 50

___________________________________________________________________________________ ______

Relevant Range:


In Total

Every Unit

Variable Cost

Expense increases or perhaps decreases in

proportion to activity level

Cost every unit is definitely constant

Fixed Cost

Cost remains continuous within

relevant range

Cost per device decreases since

activity level rises; expense per

unit increases because activity level


___________________________________________________________________________________ ______

Merged Cost:

Blended Costs ​

contain both equally ​


and ​

fixed costs.

Total Mixed Cost = Total Fixed Cost & (Total Varying Cost 2. Activity Level) ___________________________________________________________________________________ ______

High-Low Method:

Variable Price = (Cost at substantial activity level - Expense at low activity level)/(High activity level - low activity level)


Adjustable Cost = Change in Cost/Change in Activity.

We can utilize this to imagine the ​

fixed cost​

of a ​

mixed cost​


Once you find Varying Cost, in that case

Fixed Price = Total Mixed Price - (Variable Cost * Activity Level)...

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