Cost is the value of resources sacrificed to achieve a specific objective, such as manufacturing, acquiring a good, or providing a service. It is usually measured in monetary terms.
Cost accounting is a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services, in the aggregate and in detail.
Cost Unit
Unit of quantity of product, service, or time in relation to which costs may be ascertained or expressed.
Examples:
- Telecommunication: a minute.
- Automobile production: a car.
- Apartment complex: a single apartment.
Cost Centre
A location, person, or item of equipment, or group of these, for which costs may be ascertained and used for the purpose of cost control.
Relevant Cost
Costs that are specific to a management decision. Eliminates unnecessary data that could complicate the decision.
Irrelevant Cost
Costs, positive or negative, that are not related to a situation requiring a management decision.
Opportunity Cost
The cost of an alternative that must be forgone in order to pursue a certain action. The benefits that could have been received by taking an alternative action.
Standard Cost
A carefully predetermined production or operating cost. Described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, or a forecast cost, the “should be” cost.
Often an integral part of a manufacturer’s annual profit plan and operating budgets. A target cost that should be achieved.
Sunk Cost
A cost that has already been incurred and thus cannot be recovered. Not a future cost.