About This Chapter
Cost Classifications - Chapter Summary and Learning Objectives
Classifying costs is essential to proper accounting. Accounting managers must know the proper ways to categorize costs and the systems associated with these classifications. The purpose of this chapter is to introduce you to these concepts. Through informative text lessons, instructors will teach you about things like cost conversion and how it important to accounting. Check out our quizzes after you've finished each lesson to test your understanding of the material. In this chapter, you will cover information like:
- What direct and indirect costs are
- The use of period, product and prime costs in accounting
- How to convert raw materials into products
- Ways to identify relevant and irrelevant costs
- The difference between accounting and financial accounting
- What cost accounting systems are
|Direct Cost: Definition, Formula & Examples||Examine examples of direct cost and find out how it is calculated.|
|What Are Indirect Costs? - Definition & Examples||Discover how indirect costs can vary in different businesses.|
|Period Costs in Accounting: Definition & Examples||Understand the process of matching expenses to the revenue that they create.|
|Product Costs in Accounting: Definition & Examples||Define product costs in order to differentiate it from period costs.|
|Prime Cost in Accounting: Definition & Formula||Explore what components make up prime cost and how to calculate it.|
|Conversion Cost in Accounting: Definition & Examples||Analyze conversion costs and learn how to convert raw material into product.|
|Relevant & Irrelevant Costs: Definitions & Examples||Identify examples of relevant and irrelevant costs.|
|Purpose & Components of Cost Accounting||Compare and contrast accounting and financial accounting.|
|Cost Accounting System: Definition & Function||Explain the purpose of cost accounting systems and know the difference between the two traditional systems.|
1. Purpose & Components of Cost Accounting
This lesson will introduce what cost accounting is and provide a definition. It will introduce cost elements and how costs are classified in cost accounting, then compare and contrast cost accounting to financial accounting.
2. Cost Accounting System: Definition & Function
This lesson will discuss the two types of cost accounting systems and illustrate how the product costs of manufacturing integrate into the general ledger through sub-accounts.
3. Direct Cost: Definition, Formula & Examples
This lesson explains direct costs. Included in the lesson is how they are calculated. You'll also have the chance to examine examples of direct costs.
4. What Are Indirect Costs? - Definition & Examples
This lesson explains what indirect costs are and how they affect a business. Examples of indirect costs and how they can vary in different businesses are given.
5. Period Costs in Accounting: Definition & Examples
In this lesson, we'll discuss the importance of accurately determining period costs. We'll also review accounting principles associated with classifying costs and examine types of period costs.
6. Prime Cost in Accounting: Definition & Formula
Prime costs represents the total costs directly involved in manufacturing a product. This lesson breaks down the components of prime costs, its formula, and how it is used.
7. Conversion Cost in Accounting: Definition & Examples
In accounting, conversion costs are important for balance sheets and income statements. And if you cook, you are actually already familiar with these things. In this lesson, we will learn about conversion costs and practice calculating them.
8. Relevant & Irrelevant Costs: Definitions & Examples
In this lesson, we'll look at relevant and irrelevant costs. We'lll define both types of costs and walk through some examples to help better explain the concepts. The lesson will conclude with a summary of important points and a brief quiz.
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Other chapters within the Accounting 301: Applied Managerial Accounting course
- Corporate Governance for Managerial Accounting
- Financial Statements & Balance Sheets
- Manufacturing Overhead Cost Allocation
- Job Order Cost System
- Process Cost System
- Activity-Based Costing
- Cost-Volume-Profit Analysis
- Decision Making in Managerial Accounting
- Pricing Objectives & Methods
- Budgetary Control
- Standard Costs
- Capital Budgeting
- Statement of Cash Flows
- Financial Statement Analysis
- Software for Managerial Accounting
- Required Assignments for Accounting 301
- Studying for Accounting 301