Introduction to Lesson 1: Cost Concepts and Categories

Lesson 1 has five parts (be sure to complete all parts):

• 1a: Cost Concepts
• 1b: Direct versus Indirect Costs
• 1c: Fixed versus Variable Costs
• 1d: Product versus Period Costs
• 1e: Income Statement: Traditional and Contribution Margin Format

I cannot overemphasize how critical it is that you learn this lesson well. You will use it throughout the remainder of the course. Those who start with a weak foundation will struggle more and more as the course progresses. 

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Learning Objectives

Research shows that learning objectives improve the learning process. They do this by helping the reader to focus on the major issues and to organize the new information efficiently in his or her memory. Please take the time to review and consider the learning objectives at the beginning of each lesson and make sure that you have accomplished them by the end of the lesson.

After completing this lesson, you should be able to

• use cost concepts that underlie managerial accounting;
• classify costs as direct or indirect with respect to a particular cost object;
• classify costs as fixed, variable, step, or mixed with respect to a particular cost object;
• distinguish between manufacturing, merchandising, and service firms;
• describe the difference between product costs and period costs; and
• prepare an Income Statement (Earnings Statement) for manufacturing, merchandising, and service firms.

Lesson 1 Readings and Activities

By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 1 Course Schedule.

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