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b. Many new cost terms have been introduced in this chapter. It will take you some time to learn what each term means and how

b. Many new cost terms have been introduced in this chapter. It will take you some time to learn what

each term means and how to properly classify costs in an organization. Consider the following example:

Chippen Corporation manufactures furniture, including tables. Selected costs are given below:

1. The tables are made of wood that costs TK 100 per table.

2. The tables are assembled by workers, at a wage cost of 40 per table.

3. Workers making the tables are supervised by a factory supervisor who is paid 38,000 per year.

4. Electrical costs are 2 per machine-hour. Four machine-hours are required to produce a table.

5. The depreciation on the machines used to make the tables totals 10,000 per year. The machines have

no resale value and do not wear out through use.

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