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Requirement 1. Define cost conceptually and operationally. The concept of cost is defined as the monetary value of goods and services that producers and consumers purchase (Cost │ Economics, n.d.). Further, cost is also defined as the cash and cash equivalents value sacrificed for goods and services that are expected to bring a current or future benefit for the organization (De Leon, N, et al. 2022). In simple terms, it is the estimated value of a property or an object that a manufacturer ascertains in order to sell the product and eventually, gain profit. Cost is generally the most important factor in a manufacturing organization. It becomes their source of income. Whether an organization or prospers or not depends on its cost ascertainment. Costs are allocated to products in order for the organization to fulfill its main purposes, which is to maximize profit. Without cost, products produced may not cover all the expenses that the organization disbursed resulting to bankruptcy.
Requirement 2. Differentiate cost, expense and loss. Use a Venn Diagram. Requirement 3. Differentiate and discuss what is a direct and indirect cost in a tabular form. Direct Cost Indirect Cost These are costs that have direct attributions to the finished product. These are costs that cannot be explicitly traced to the finished product. Costs that can be traced directly to the output. These are expenditures incurred in maintaining the company. Direct costs fluctuates depending on the item being reviewed. Most indirect costs are fixed costs and used in the day-to-day operations of the -Cash Outflow -Expires -Value of cash or cash equivalents incurred to produce product or provide services that is expected to bring future economic benefit. -It is the price paid to acquire an asset. -Costs can be capitalized in the balance sheet. -Costs are said to expire. -It is the negative balance within the organizations income statement or the cost that expires without producing any revenue benefit. -Loss is the inability of the organization to gain profit in the current year. -It can either result from natural disasters such as fire, earthquakes, and floods; or form poor management. -These are expired costs and has a no future economic benefit. -These are the payments incurred in the normal operation of a business. -It cannot be capitalized and presented as an income statement account. -It incurred on a regular basis.
Costs^ Expenses
Loss
2 4 6 8 10 12 ₱1,000. ₱2,000. ₱3,000. ₱4,000. ₱5,000. ₱6,000. ₱7,000. ₱8,000.
Fixed Costs, Variable Costs, and Mixed Costs
Fixed Costs Variable Costs Semi-Variable Costs Step Costs Costs ← Output
Requirement 7. Consider yourself being the general manager of a catering and events business. What are the direct and indirect costs that your business would be incurring? In a catering and events business, there is a wide spectrum for the direct and indirect costs. As a manager, I should be capable of determining which classifies under each category in order to properly allocate the cost of service that can help me incur gain. Direct Costs Table settings: plates, cutlery, and glasses. Decorations: balloons, flowers, cakestands, confetti, and centerpieces. Food and Beverages Employees: service crews, photographer, designer, cooks, and master of ceremonies. Indirect Costs Food preparation: aluminum foils, kitchen utensils, induction cookers, grills, burners, trays, and server aprons. Decorations: glue, staples, napkins, and tablecloths. Employees: maintenance workers, commission fee of the delivery drivers, server aprons and uniforms. References: Cost │ Economics. (n.d.). Encyclopedia Britannica. Retrieved September 26, 2022, from https://www.britannica.com/topic/cost Bragg, S. (2022, May 15). Prime costs definition. AccountingTools. Retrieved September 25, 2022, from https://www.accountingtools.com/articles/what-are-prime-costs.html/ Bragg, S. (2022, May 24). Semi-variable cost definition. AccountingTools. Retrieved September 25, 2022, from https://www.accountingtools.com/articles/what-is-a-semi-variable-cost.html Spielman, E. (2022, August 5). Direct Costs vs. Indirect Costs: What Are They, and How Are They Different? Business News Daily. Retrieved September 26, 2022, from https://www.businessnewsdaily.com/5498-direct-costs-indirect-costs.html The Essential Catering Supplies Checklist for 2022. (2022, June 20). WebstaurantStore. Retrieved September 26, 2022, from https://www.wwenstaurantstore.com/article/516/catering-supplies- checklist.html
