Chapter 9 - Managerial accounting for costs. This chapter will teach you how to recognize the different types or categories of costs that managerial accountants consider when they analyze the total costs incurred by a hospitality business. The most important of these various types include fixed, variable, step, mixed, direct, indirect, controllable, and non-controllable costs. | Chapter 9 Managerial Accounting for Costs The Concept of Cost Types of Costs Cost/Volume/Profit Analysis Chapter Outline Learning Outcomes Identify the concept of a business cost. Differentiate between the different types of business costs. Perform (when costs are known) a cost/volume/profit analysis. The Concept of Cost Given all the possible approaches to examining costs, perhaps the easiest way to understand them is to consider their impact on a businesses’ profit. At any specific level of revenue, the lower a business’s costs, the greater are its profits. There are a variety of useful ways in which hospitality managers and managerial accountants can view costs and thus can better understand and operate their own businesses. Types of Costs Useful ways to classify business costs are: Fixed and variable costs Mixed costs Step costs Direct and indirect (overhead) costs Controllable and non-controllable costs Joint costs Incremental costs Standard costs Sunk costs . | Chapter 9 Managerial Accounting for Costs The Concept of Cost Types of Costs Cost/Volume/Profit Analysis Chapter Outline Learning Outcomes Identify the concept of a business cost. Differentiate between the different types of business costs. Perform (when costs are known) a cost/volume/profit analysis. The Concept of Cost Given all the possible approaches to examining costs, perhaps the easiest way to understand them is to consider their impact on a businesses’ profit. At any specific level of revenue, the lower a business’s costs, the greater are its profits. There are a variety of useful ways in which hospitality managers and managerial accountants can view costs and thus can better understand and operate their own businesses. Types of Costs Useful ways to classify business costs are: Fixed and variable costs Mixed costs Step costs Direct and indirect (overhead) costs Controllable and non-controllable costs Joint costs Incremental costs Standard costs Sunk costs Opportunity costs Types of Costs Not all business costs can be objectively measured. In fact, in some cases, costs can be a somewhat subjective matter such as “talking with customers regarding invoices”. Cost accountants facing such issues can assign each hospitality employee’s time to different activities performed inside a company. An accountant can then determine the total cost spent on each activity by summing up the percentage of each worker's time and pay that is spent on that activity. Types of Costs This process is called activity based costing and it seeks to assign objective costs to somewhat subjective items such as the payment for various types of labor as well as the even more subjective management tasks involved with planning, organizing, directing and controlling a hospitality business. Using activity based costing to examine expenses and thus better manage a business is called activity based management and it is just one example of how fully understanding costs .
