COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Period costs and product costs
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Opportunity costs and sunk costs
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Marginal costs and controllable costs
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Direct costs and indirect costs
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Detailed explanation-1: -Direct and indirect costs are the major costs involved in the production of a good or service. While direct costs are easily traced to a product, indirect costs are not.
Detailed explanation-2: -We get two types of costs based on traceability, viz. direct and indirect costs. The basis is the cause and effect relationship between the cost element and cost object or traceability of costs to its cost object.
Detailed explanation-3: -Costs are broadly classified into four types: fixed cost, variable cost, direct cost, and indirect cost.
Detailed explanation-4: -Examples of direct costs are direct labor, direct materials, commissions, piece rate wages, and manufacturing supplies. Examples of indirect costs are production supervision salaries, quality control costs, insurance, and depreciation.
Detailed explanation-5: -Costs that are not incurred solely for a particular activity but, through reasonably objective means, can be traced, in part, to the activity for which they are incurred.