3/18/22, 5:56 PMCost management CH 3 Flashcards | Quizlet
Page 1 of 9//quizlet.com/317716348/cost-management-ch-3-flash-cards/
HomeExplanations Your library
Cost management CH 3
9 studiers in the last day
Social ScienceEconomicsFinance
Terms in this set (50)
Since indirect cost cannot be
conveniently or economically
traced directly to a cost pool or
cost object, the management
accountant will:
assign thm by means of cost allocation
All indirect manufacturing costs
are commonly combined into a
single cost pool called:
overhead
Variable costs within the
relevant range for a firm are
assumed:
not to vary per unit
How will unit (average) cost of
manufacturing (materials, labor
and overhead) usually change if
the production level rises?
it will decrease, but not indirect proportion to the
production increase
Structural cost drivers are to
executional cost drivers as:
long term is to short term
Direct labor is production or services labor that is assigned to a specific product, cost center, or work order. When a business manufactures products, direct labor is considered to be the labor of the production crew that produces goods, such as machine operators, assembly line operators, painters, and so forth. When a business provides services, direct labor is considered to be the labor of those people who provide services directly to customers, such as consultants and lawyers. Generally, a person who is charging billable time to a customer is working direct labor hours.
The cost of direct labor is generally considered to be the cost of regular hours, shift differentials, and overtime hours worked by employees, as well as the related amounts of payroll taxes. An expanded version of direct labor, known as fully-burdened direct labor, also includes an allocation of the benefit costs earned by direct labor employees.
Direct labor is considered to be a direct cost, which means that it varies directly with revenue or some other measure of activity. This is not necessarily the case in a production environment, where the manufacturing area typically requires a certain amount of staffing, irrespective of the number of units produced. The direct cost concept is more applicable in a professional billings environment, where the cost of direct labor usually varies with changes in revenue.