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9 Cards in this Set
- Front
- Back
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Why Classify?
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Introduces idea of control and accountability, responsibility for costs, explains performance.
-individual people or responsible for responsible for them |
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Direct Costs
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A costs directly traceable to product/service being used. Easily identified in full. e.g. For fitness centre - salary of assistant working there or cost of fuel, tyres and engine for F1 car.
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Indirect Costs
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A cost not directly traceable to product or service, may be incurred by lots of activities.
-Often termed overheads E.g.For fitness centre - salary of swimming pool manager |
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Semi - indirect costs or Semi direct costs
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In reality few costs are ever completley fixed or variable. Many will have fixed elements to them or fixed charges that need to be paid before better deals can be accessed.
-Such costs are affected by output. e.g. mobile contracts -On the graph line begins above oo on the axis |
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Fixed Costs
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cost incurred for time period which within certain activity levels is unaffected by changes in the level of activity.
e.g. rent, staff salaries or straight line depreciation |
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Variable Costs
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Costs that vary according to level of activity,
e.g. direct materials and most utilities (water, electricity) These costs incur when you make a product or deliver service -Show relationship on graph cost rises in line with output. |
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Stepped costs
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Cost are fixed over certain range of output but will increase as capacity is reached. (Graph looks like steps)
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Total cost
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Fixed and variable costs.
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Why does classifying cost hold accountability
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-size and scale of organisation will impact classification
-can hold departments accountable small organisations find it easier to hold individuals to account -relationship between cost control and organisational structure v important |
