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9 Cards in this Set

  • Front
  • Back
Sacrifice or resources
Not just cash
Meaning in context:
Amount paid in past
Amount paid to replace
Rental fee
Ammount foregone because don't sell
Amount paid less accumulated depreciation
Opportunity Cost
Amount foregone from the "roads not taken"
Best alternative use
In contrast with Outlay costs
is how much you spend for something you don't have or how much would you take for something you have
Differences between Cost and Expenses
All expenses are costs, not all costs are expenses.
Timing distinguishes costs from expenses

Expenses are recorded in accounting records while costs are not.

All costs will become expenses at a later time
Direct Cost
Can be traced directly to a product or service.
Indirect Cost
Cannot be directly traced to a product or service.
Cost Object
Any item for which the manager wishes to measure cost.
Fixed Cost
Costs that do not change in total with the level of activity.
Variable Cost
Costs that change in total as the level of activity changes.
What causes cost?
Producing a product requires activities, which in turn generate costs. Activity-based-management studies the need for activities and whether they are operating efficiently.