Question

In: Accounting

1. The term “cost” is simply puzzling to people who do not have a background in...

1. The term “cost” is simply puzzling to people who do not have a background
in accounting.
Explain the following
(a) Cost Driver
(b) Cost Function
(c) Cost Object

Solutions

Expert Solution

  1. Cost Driver – Cost driver can be defined as a factor that can cause a change in the cost of an activity. An activity can have more than one cost driver. Cost Driver triggers a change in the cost an activity. This concept is most commonly used to determine the cause of an overhead, which can be used to minimize the overhead costs.

Examples of Cost Drivers

  • Direct Labor Hours
  • Number of customer contract
  • Number of Machine Hours
  • Number of product returns
  • Number of change orders issued on engineering front.

In accounting cost driver is a factor that incurs cost, based on the activity of the cost driver, the cost driver rate is identified at which indirect costs are allocated to production activities.

2. Cost Function – It’s a mathematical formula used to predict the cost associated with a certain action or certain level of output. It is used to forecast cost and expenses associated in production, to determine the pricing strategies to achieve desired profit. Management uses it to run different production scenarios and help predict what the total cost would be to produce a product at different levels of output. The cost function is expressed as C(x) = Fixed Cost + V(x)

Where is C(x) is total cost of production and V(x) is the variable cost of the production.

3. Cost Object – A cost object is the product or a department for which the cost is accumulated and measured. For example, a product is the cost object for direct material, Direct Labor and Manufacturing Overhead. The factory maintenance department is the cost object for cost of employees in maintenance department and maintenance related supplies. A cost object can also be a batch of product, a customer, a machine or group of it or a group of employees etc.


Related Solutions

Are there some people who simply can’t be motivated at work? Discuss.
Are there some people who simply can’t be motivated at work? Discuss.
You are a supervisor or manager. Are there some people who simply can’t be motivated at...
You are a supervisor or manager. Are there some people who simply can’t be motivated at work? Discuss.
Research Scenario:You have a group of 25 people who have high cholesterol and do not do...
Research Scenario:You have a group of 25 people who have high cholesterol and do not do any form of exercise. You want to know if a person’s cholesterol statistically significantly decreases after running for 30 minutes four times per week. You implement a 3-month treatment that consists of running for 30 minutes four times per week. You measure 25 individuals’ cholesterol levels before and after the treatment. Study the descriptive statistics and summary output tables below and answer the questions...
BACKGROUND: Given a group of 'n' people, the odds that at least two people have the...
BACKGROUND: Given a group of 'n' people, the odds that at least two people have the same birthday are much higher than you would think. PLEASE WRITE CODE IN C++ The program takes no input. Assumptions: 1. There is an equal chance of birthday landing on any day of the year. 2. We are not considering a leap year (only 365 days) The simulation will be run in the following manner: 1. For a group size 2, assign a random...
Data was collected to study the background of the people who participate in online gambling. Data...
Data was collected to study the background of the people who participate in online gambling. Data was collected to study the background of the people who participate in online gambling. Data was collected to study the background of the people who participate in online gambling. Data was collected to study the background of the people who participate in online gambling. Data was collected to study the background of the people who participate in online gambling. Data was collected to study...
Data was collected to study the background of the people who participate in online gambling. 64...
Data was collected to study the background of the people who participate in online gambling. 64 people were selected at random and asked about their annual salary and whether they went to college. After the survey, sample mean and sample standard deviation were calculated. They were $90K and $30K respectively. A. Calculate 95% confidence limits for the population mean annual salary. B. What is the interpretation of the limits in part A? C. If you calculate 99% confidence limits for...
label and simply define the term: OXYGEN
label and simply define the term: OXYGEN
Do people who have lower deductibles for their health insurance tend to go to doctors more...
Do people who have lower deductibles for their health insurance tend to go to doctors more than people with higher deductibles?
Diet is a term that simply means “what you eat.” This term is often used in...
Diet is a term that simply means “what you eat.” This term is often used in conjunction with losing weight. In this assignment, you will compare (explain how they are the same) and contrast (tell how they are different) the three diet plans identified below. Latin American Diet Plan Mediterranean Plate Mediterranean Diet Plan USDA My Plate So, start out by: Describe each of the 3 diet plans or pyramids. Address each plan individually and explain the key components of...
Instructions: Quite often, I have heard many people say that "a managers job is simply to...
Instructions: Quite often, I have heard many people say that "a managers job is simply to tell people what to do." I sometimes wonder if that is true! Hey, I just thought of a great idea. Instead of just wondering if that statement has any validity to it, let's just ask a manager. Your task for this week is to interview a manager.  It can be a present or past manager or someone whom you have never worked with. You may...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT