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Title: An Introduction to Cost Terms
Description: It contains summary of chapter 2 of "Cost Accounting: A Managerial Approach" book from Charles T. Horngren, Srikant M. Datar, and Madhav V. Rajan. It is written concisely in 2 pages, based on learning objectives of the chapter.

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CHAPTER 2: AN INTRODUCTION TO COST TERMS AND PURPOSES

Document Type

: Book Summary

Source

: Cost Accounting: A Managerial Emphasis 15th Edition by Charles T
...
Datar, and Madhav V
...
It can be in the form of
products, services, projects, customers, activities, or even departments
...
The assignment of direct costs to
a particular cost object is called “cost tracing”; while



Indirect costs of a cost object are related to the particular cost object but cannot be
traced to it in an economically feasible (cost-effective) way
...


Learning Objective 3

: Explain Variable Costs and Fixed Costs

Based on cost-behavior patterns, costs can be classified as either:


Variable costs, which change in total in proportion to changes in the related level of
total activity or volume of output produced; or



Fixed costs, which remain unchanged in total for a given time period, despite wide
changes in the related level of total activity or volume of output produced
...

Unit costs are found in all areas of the value chain
...
Although unit costs are
regularly used in financial reports and for making product mix and pricing decisions,

managers should think in terms of total costs rather than unit costs for many decisions
...


Learning Objective 6


: Illustrate the Flow of Inventoriable and Period Costs

Inventoriable costs flow through inventories account in the balance sheet and are
expensed when (finished) goods are sold; while



Period costs are always expensed as incurred
...
That’s because there are alternative ways for
managers to define and classify costs
...

Learning Objective 8

: Describe a Framework for Cost Accounting and Cost
Management

There are three features of cost accounting and cost management that can help
managers make decisions
...



Title: An Introduction to Cost Terms
Description: It contains summary of chapter 2 of "Cost Accounting: A Managerial Approach" book from Charles T. Horngren, Srikant M. Datar, and Madhav V. Rajan. It is written concisely in 2 pages, based on learning objectives of the chapter.