Chap 2

• A physical quantity measurement
• Multiplied by a price measurement

• eg.
• 100 units at 6€ = cost of €600

• Variable Cost
• Which variy directly with changes in the level of activity, over a defined period of tim
• Fixed cost
• Which is not affected by changes in the level of activity, over a defined period of time
• Direct cost
• Directly traceable to an identifiable unit, such as a product or service or department of the business for which cost are to be determined
• Indirect cost
• Are spread over a number of identifiable units of the business such as products or services  or departments for which cost are to be determined. Indirect cost are also called overhead costs.
• Product cost
• those costs associated with goods or services purchased or produced for sale to customers
• Period cost
• Those costs which are treated as expenses in the period in which they are incurred.

• Activity= generally, any physical operation that takes place in an organization
• Output= Product or service provided by the organization

Partly fixed and partly varies with changes in the level of activity over a defined period of time

Fixed cost increases by steps

• -Materials used to manufacture a unit of output or to provide a type of service
• -Labour costs of manufacturing a unit of output or providing a type of service
• -Commission paid to a salesperson
• -Fuel used by a haulage company

• -Rent of buildings
• -Salary paid to a supervisor
• -Advertising in the trade journals
• -Business rates paid to the local authority
• -Depreciation of machinery calculated on the straight-line basis

• -Office salaries where there us a core of long-term secretarial staff plus employment of temporary staff when activity levels rise.
• -Maintenance charges where there is a fixed basic charge per year plus a variableelement depending on the number of callouts per year

A unit of the organization in respect of which a manager is responsible for costs under his or her control

A unit of the organization in respct of which a manager is responsible for revenue as well as costs

A unit of the organization in respct of which a manager is responsible for capital investment decisions as well as revenue and costs.