Cost Accounting Chapter02 Terms Behaviors
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Transcript of Cost Accounting Chapter02 Terms Behaviors
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7/21/2019 Cost Accounting Chapter02 Terms Behaviors
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Chapter 2:
Cost Terminology andCost Behaviors
Cost Accounting:
Foundations & Evolutions, 8e
$inney and Raiborn
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Learning Objectives %hy are costs associated with a cost ob&ect'
%hat assu"ptions do accountants "a(e about costbehavior, and why are such assu"ptions necessary'
)ow are costs classi!ied on !inancial state"ents, andwhy are such classi!ications use!ul'
)ow does the conversion process occur in"anu!acturing and service co"panies' %hat are the product cost categories, and what ite"s
co"prise those categories' )ow and why does overhead need to be allocated to
products' )ow is cost o! goods "anu!actured calculated and
used in preparing an inco"e state"ent'
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Cost Categories
Association with cost ob&ect Cost ob&ect is anything !or which "anage"ent wants to collect
or accu"ulate costs
Reaction to changes in activity
Classi!ication on the !inancial state"ents
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Cost Categories
Association with cost ob&ect *irect+traceable to a cost ob&ect
ndirect+not conveniently or practically
traceable to a cost ob&ect treated as overhead
allocated
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Cost Categories
Association with cost ob&ect Reaction to changes in activity
-ariable
ied Mied
/tep
Relevant Range+normal operating range
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Total and Unit CostBehavior
Varies in directproportion to
changes in activity
Remains constant
throughoutthe relevant range
Remains constantthroughout the
relevant range
Varies inversely
with changes inactivity throughoutthe relevant range
Variable
Cost
Fixed
Cost
Total Cost Unit Cost
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Cost Categories
Classi!ication on the !inancial state"ents nepired+balance sheet assets
pired+inco"e state"ent epenses
roduct+inventoriable costs ri"e+direct "aterial and direct labor
Conversion+direct labor and overhead
roduct costs are unepired be!ore sale
roduct costs are epired when sold eriod+epensed in period incurred
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Product Costs
*irect "aterial Measurable part o! a product
*irect labor
Labor used to "anu!acture a product orper!or" a service
3verhead
ndirect production cost
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Period Costs
/elling and ad"inistrative costs
*istribution costs Cost to warehouse, transport, and4or deliver a
product or service Ma&or i"pact on "anagerial decision "a(ing
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urchase
raw "aterials
or supplies
nput
roduct or
/ervice
3utput
CONVERSION
Conversion ProcessChange Inputs into Outputs
2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
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Materialsnventory
%or( in rocess
nventory
inished
5oodsnventory
Cost o!
5oods
/old
6alance /heetnco"e
/tate"ent
Cost Accumulation in aManufacturing Compan
2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Product Cost ! "irect
*irect Material Conveniently and econo"ically traced
to cost ob&ect
*irect Labor to "anu!acture a product or per!or" a service
includes wages paid to direct labor e"ployees,
production bonuses, and payroll taes
"ay include holiday and vacation pay,
insurance, and retire"ent bene!its
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Product Cost ! Indirect
3verhead+indirect production costs ringe bene!its, i! cannot be easily traced to
product
3verti"e, i! due to rando" scheduling
Cost o! 7uality revention costs
Appraisal costs ailure costs
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in alicense distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Overhead Cost Allocation
Assign indirect costs to one or "ore cost ob&ects
8o deter"ine !ull absorption cost 95AA:
8o "otivate "anage"ent
8o co"pare alternative courses o! action !orplanning, controlling, and decision "a(ing
Allocation process should be rationaland syste"atic
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Produt Cost
*irect Materials
*irect Labor
3verhead
!tual Cost
System
Actual
Actual
Actual
Normal Cost
System
Actual
Actual
redeter"ined
3verhead Rate
Allocating Overhead
Actual vs# $ormal
2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in a
license distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in a
license distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
Predetermined Overhead
%ate Allows overhead to be assigned
during the period
Co"pensates !or !luctuations that are not related to activity level
in activity level that do not a!!ect !ied
overhead
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in a
license distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
&uestions
%hat is the di!!erence between a !ied and
variable cost'
%hat are the three co"ponents o! product
cost'
%hat are the three inventory accounts !or a
"anu!acturing co"pany'
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2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in a
license distributed with a certain product or service or otherwise on a password#protected website !or classroo" use.
'thical Issues
pired costs+not on the balance sheet
eriod costs+not inventory
roduct costs+not selling or ad"inistrative
costs
*irect labor+not overstated
nding inventory+not overstated