Introduction to Cost Concepts

Lesson 1a covers cost terminology used throughout most cost or managerial accounting courses. These cost terms apply to all kinds of organizations: manufacturing, merchandising (whether wholesale or retail), service, not-for-profit, and governmental. In short, these terms apply to any organization that incurs costs. 

This lesson will discuss the following terms:

• Cost
• Cost objects
• Cost pools
• Unit or average cost
• Marginal and variable cost
• Cost assignment
• Cost tracing
• Cost allocation
• Cost drivers
• Cost allocation bases

After you have covered this material, you will see this same list at the end of the lesson. If there is a particular term you are unclear about, you can then go back directly to the discussion of that term.

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Learning Objectives

After completing this part of the lesson, you should be able to

• use cost concepts that underlie managerial accounting.

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