Explain the Difference Between Locked in Costs and Costs Incurred

question 140

Essay

Explain the difference between locked in costs and costs incurred. Which of these types of costs does a traditional accounting system emphasize? At which stage of the value chain are most costs locked-in? At which stage of the value chain are most costs incurred? What implication does this have for good cost management?

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Definitions:

Taxable

Subject to being taxed by governmental authority.

Engagement Ring

A ring traditionally given during a marriage proposal to symbolize intent to marry.

Fault Approach

A legal principle in tort law where the liability for damages is determined by establishing who was at fault for causing the harm.

No-fault Approach

A legal framework where parties are compensated for damages or injuries regardless of fault or negligence.