COST ACCOUNTING-Allocation and apportionment of overhead cost departmentalization processDB4DgFkLsa
Is traceable fixed cost of the Fritos business segment of Pepsi Co. Distinguish between direct costs, indirect costs, and factory overhead. Give three examples of variable costs and fixed costs. Explain the difference between fixed costs and variable costs.
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- A direct cost is a price that can be directly tied to the production of specific goods or services.
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- Define variable and fixed costs, and provide at least two examples of each.
- Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications.
Comment on cost distortions commonly observed in traditional costing systems. Explain why the distinction between these two types of costs is important. Explain how standard costs are developed, and discuss how to calculate and interpret variances for direct materials.
The division manager or department manager will typically have control over their direct costs. A fixed cost is a type of expense that does not change. In accounting, it means the amount remains the same over several periods. Usually, companies view this cost according to the activity levels over that period.
What are traceable and untraceable costs?
The primary distinction between fixed costs that are traceable and those that are untraceable is that the former may be assigned to particular facilities or programs, whilst the latter are distributed uniformly across the supply chain.
Assigning common fixed costs to segments impacts the ability to improve profitability in the long run. Although direct costs are typically variable costs, they can also be fixed costs. Rent for a factory, for example, traceable cost could be tied directly to a production facility. In the case where the machinery is used specifically for a project, the depreciation on that particular machinery will be regarded as a traceable fixed cost.
Traceable Fixed Costs
The direct cost that can be attributed or traced directly to one client, would be the time spent by the bookkeeper on that client’s work. The receptionist on the other hand, is not directly involved with client work, but answers the phones, files and makes appointments. Other possible indirect costs in this service business would include computer software, printer ink and pens. Direct costs are a cost that can be easily traced to a specific product or service while indirect costs cannot be easily traced.
- Some fixed costs that are considered traceable by one segment may be considered common costs by another segment.
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- Describe the difference between job order costing and process costing systems.
- The healthcare supply chain involves obtaining resources, managing supplies, and delivering goods and services to patients across multiple teams, stakeholders, and geographical boundaries.
- Fixed cost that is traceable to one segment can become a common cost for another segment.
It is one of the two main types of costs incurred by businesses, the other being variable costs. Fixed costs are sometimes also referred to as overhead costs. They are considered to be part of the cost of production, along with variable costs, and are therefore used in the calculation of total cost. Traceable fixed costs, the meaning of this type of cost, and the distinction between traceable and common fixed costs are relevant in segmented financial reporting. The Financial Accounting Standards Board requires that businesses provide segmented financial data in their annual reports.
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