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5 Cards in this Set

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Product and Period Cost

Product: the direct materials, direct labor, and manufacturing overhead used in making products


Period: -Not usually part of the manufacturing process, so period costs cannot be assigned to the products


-The period costs are usually associated with the selling function of the business or its general administration

Direct and Indirect Expenses

Indirect: are those expenses that are incurred to operate a business as a whole or a segment of a business


ex.Accounting, audit, and legal fees, Business permits, Office Space


Direct: A direct cost is traceable to a specific item, such as a product.


ex. the cost of the materials used to create a product is a direct cost



Differential Cost



is the difference between the cost of two alternative decisions, or of a change in output levels. The concept is used when there are multiple possible options to pursue, and a choice must be made to select one option and drop the others

Sunk Cost

money that has already been spent and cannot be recovered. they should not play a role in decision-making.

Opportunity Cost

the loss of potential gain from other alternatives when one alternative is chosen.