Cornerstones of Cost Accounting - Essay Example

Consequently, resources for the division include management (supervisors), building, energy or electric power, production management, labor, equipment, materials, and supplies.

Finally, cost drivers include hours, number of employees, number of setups, number of wheels, number of inquiries, number of products produced, number of machines maintained, and number of hours of supervision.

Cost behavior normally relates to various activities as well as the consumption of resources ((Hansen et al. 2009). Such resources have costs that are either fixed and do not vary directly with resource usage in the short run or variable and vary in direct proportion to resource consumption. Activities usually consume resources and the costs of such resources often follow various behavioral patterns (Needles et al. 2010).

Since the supervisors spend an equal amount of time with each employee they supervise, the costs associated with it are fixed, and they do not vary directly with resource usage. Since the building is allocated based on square footage, the costs are variable. There is a direct correlation between the amount of space used and the rent. There is also a direct correlation between the Energy or electric power consumed and the number of units produced (Needles et al. 2010).

In terms of labor, the costs are variable as they change in direct proportion to the number of units produced. The cost of equipment is fixed and does not vary directly from the units produced. The cost of materials varies in direct proportion to the number of units produced. There is an indirect relationship between the amount of supplies and production time. The costs, therefore, vary in direct proportion to the resource consumption ((Hansen et al. 2011). Read More