ACCOUNTING 281: INTRO TO MANAGERIAL ACCOUNTING - Survival Cheat Sheet - Core Concepts of Management Accounting

Oct 13, 2026

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Survival cheat sheet for Accounting 281 that summarizes core concepts in management accounting with a focus on classifying and measuring costs. Covers product versus period costs, including the logic for when a cost “goes away” after stopping production, and explains direct and indirect (overhead) cost traceability. Provides definitions for cost objects, cost drivers, relevant versus irrelevant costs, and core behavior classifications (variable and fixed), then links these to common combinations used in product costing.

LanguageEnglish

CategoryPresentations

FormatPDF

Pages8

Reading Time3 min

AccessFree to download

Measuring Cost

Types of Costs

Product costs vs period costs

Relevant vs irrelevant costs

Direct vs indirect (overhead)

Basic Cost Terminology

Classification by Traceability

Classification for Financial Statements

Classifications of Manufacturing Costs

Prime and conversion costs

Cost behavior: variable vs fixed

Cost combinations

Introduction to Product Costing Systems

Job vs process costing

Job costing system steps

Key building blocks: cost object, cost pool, allocation base

1 ACCOUNTING 281: INTRO TO MANAGERIAL ACCOUNTING SURVIVAL CHEAT SHEET Class 2-1/11/17-Core Concepts of Management Accounting ● Measuring Cost ○ Types of Costs ■ Financial Accounting Perspective ● Product Costs: direct labor, direct materials, and manufacturing overhead ● Period Costs: selling, general, and administrative costs ■ Managerial Accounting Perspective ● Variable Costs: Costs that vary with sales volume ● Fixed Costs: Costs that do not vary over the relevant range ■ Economics Perspective ● Costs are classified according to decision relevance ○ Relevant Costs: Differential costs and opportunity costs ○ Irrelevant Costs: Sunk costs ○ Basic Cost Terminology ■ Cost-resources sacrificed to achieve a specific objective ■ Cost Object-anything of interest for which a measure of cost is desired ○ Classification Based on Traceability to a Cost Object ■ Direct Cost: a cost that can be traced directly and completely to a specific cost object, in a cost effective way ● A direct cost is traced to a cost object ■ Indirect Cost: A cost that cannot be traced directly and completely to a specific cost object (Indirect costs are also referred to as Overhead costs (MOH)) ● An indirect cost is allocated to a cost object ■ ○ Cost Classifications for Preparing Financial Statements ■ Product Costs include direct materials, direct, labor, and manufacturing overhead ■ Period Costs include all selling costs and administrative costs 2 ■ ■ Product cost or period cost? ● Will the cost go away if you stop producing immediately? ○ If yes, product cost, if no then period cost ○ Classifications of Manufacturing Costs ■ Direct Material, Direct Labor, Manufacturing Overhead ■ ■ Prime costs, fundamental cost ■ Conversion cost, processing cost ○ Classifications based on Behavior ■ Cost Driver-a factor whose change “causes” a change in the total amount of cost ● That which “drives” the cost to be incurred, in the first place, or to change, subsequently ● Specific costs may have more than one cost driver ○ Cost Classifications ■ Variable-costs that CHANGE in total in proportion to changes in the related cost driver (but are constant on a per unit basis) ■ Fixed-Costs that DO NOT CHANGE for a given time period despite changes in the related cost driver (but, on a per unit basis, vary inversely with the level of activity) ○ Multiple Classifications of Cost ■ As we have noted, costs may be classified as: ● Direct or Indirect ● Variable or Fixed ■ These multiple classifications give rise to the following cost combinations: 3 ● Direct and Variable ● Direct and Fixed ● Indirect and Variable ● Indirect and Fixed Class 3-1/18/17- Introduction to Product Costing Systems ● Product Costing Systems-Job vs. Process Costing ○ There are two principal kinds of product costing systems. The choice between then substantially depends upon the nature of the firm’s production process ○ Job Costing Systems ■ A job costing system is used by firms which produce relatively unique products or services or distinct batches of similar products (perhaps for different customers), each which is referred to as a “job” ■ In a job costing system, costs are assigned to each specifically identifiable jobcost object-as it moves through the production processes ■ A job costing system provides an estimate of the cost for each “job” ■ Examples of firms that use a job costing system: ● Public accounting firms ● Consulting firms ● Advertising agencies ● Government contractors ● Custom manufacturers-tool and die firms ○ Process Costing Systems ■ Used in those cases where the firm produces relatively large quantities of goods that are substantially identical (i.e. mass production) ■ Costs are accumulated into cost pools (during the accounting period), one for each production department (process) ■ At the end of the period, costs are allocated from a department (

FAQs

What is the difference between product costs and period costs?

Product costs are tied to production (including direct materials, direct labor, and manufacturing overhead). Period costs include selling and administrative costs and are not determined by production activities in the same way.

How do you decide whether a cost is direct or indirect?

A direct cost can be traced directly and completely to a specific cost object in a cost-effective way. An indirect cost cannot be traced directly and completely and is allocated to a cost object as overhead (MOH).

How does the predetermined overhead rate (POHR) determine overhead applied to jobs?

POHR is calculated before the period using estimated total manufacturing overhead divided by estimated total units in the allocation base. Overhead applied equals the actual application-base amount for the job multiplied by POHR.

Oct 13, 2026

Upload by dawugda