cost accumulation and measurement chapter 3 managerial accounting concepts and empirical evidence

Cost Accumulation and Measurement

Chapter 3

Managerial Accounting

Concepts and Empirical Evidence

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Dichotomy BetweenVariable / Fixed Costs and Direct / Indirect Costs

VariableCosts

FixedCosts

Direct Costs

Indirect Costs

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Manufacturing Vs.Non-manufacturing costs

- Direct Material- Direct Labor- Indirect Costs

Inventoriable Costs

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

- General & Administrative- Selling- Research & Developent

- Direct Material- Direct Labor- Indirect Costs

Manufacturing Vs. Non-manufacturing costs

Period Costs

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Work In Progress

Ren CorporationBasic Cost / Product Flow Chart for Manufacturing Firm

Finished Goods Cost of Goods Sold

Indirect Manufacturing Costs

Direct Manufacturing Costs

CuttingDepartment

Expanded View?

AssemblingDepartment

FinishedDepartment

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren CorporationExpanded Cost / Product Flow Chart for Manufacturing Firm

CuttingDepartment

Direct Manufacturing Costs•Materials•Labor

Indirect Manufacturing Costs•Supplies•Supervisor’s Salary•Depreciation•Utilities•Maintenance•Insurance

AssemblingDepartment

FinishingDepartment

FinishedGoods

Costs of Goods Sold

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren Corporation Job Costing Sheet

J ob Started: COMPLETI ON DATE :

J ob # : J OB DESCRI PTI ON : Wooden Desk

QUANTI TY : 100

Cost f or 100 Desks

100

$20.00

$2,000.00

DI RECT MATERI ALS

FI NI SHI NG

Quantity

Unit Costs

100

$1.00

CUTTI NG ASSEMBLI NG

APPLI ED OVERHEAD

4/ 15/ 94

22

CUMULATI VE TOTAL

CUMULATI VE UNI T TOTAL

DEPARTMENTAL COST

$ 2 Per Direct

Labor Hour

Cost f or 100 Desks

RateDI RECT LABOR

Hours

5/ 15/ 94

100

$5.00

$500.00$100.00

DM = Qty Unit Cost$2,000.00 = 100 $20.00

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren Corporation Job Costing Sheet

J ob Started: COMPLETI ON DATE :

J ob # : J OB DESCRI PTI ON : Wooden Desk

QUANTI TY : 100

Cost f or 100 Desks

100

$20.00

$2,000.00

DI RECT MATERI ALS

FI NI SHI NG

Quantity

Unit Costs

100

$1.00

CUTTI NG ASSEMBLI NG

$3,000.00 $250.00 $1,200.00

100

$15.00 $5.00 $12.00

200 50

APPLI ED OVERHEAD

4/ 15/ 94

22

CUMULATI VE TOTAL

CUMULATI VE UNI T TOTAL

DEPARTMENTAL COST

$ 2 Per Direct

Labor Hour

Cost f or 100 Desks

RateDI RECT LABOR

Hours

5/ 15/ 94

100

$5.00

$500.00$100.00

DL = Hours Rate$1,200 = 100 $12.00

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren Corporation Job Costing Sheet

J ob Started: COMPLETI ON DATE :

J ob # : J OB DESCRI PTI ON : Wooden Desk

QUANTI TY : 100

Cost f or 100 Desks

100

$20.00

$2,000.00

DI RECT MATERI ALS

FI NI SHI NG

Quantity

Unit Costs

100

$1.00

CUTTI NG ASSEMBLI NG

$3,000.00 $250.00 $1,200.00

100

$15.00 $5.00 $12.00

200 50

$400.00 $100.00 $200.00 APPLI ED OVERHEAD

4/ 15/ 94

22

CUMULATI VE TOTAL

CUMULATI VE UNI T TOTAL

DEPARTMENTAL COST

$ 2 Per Direct

Labor Hour

Cost f or 100 Desks

RateDI RECT LABOR

Hours

5/ 15/ 94

100

$5.00

$500.00$100.00

App OH = Hours OH Rate$100 = 50 $2.00

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren Corporation Job Costing Sheet

J ob Started: COMPLETI ON DATE :

J ob # : J OB DESCRI PTI ON : Wooden Desk

QUANTI TY : 100

Cost f or 100 Desks

100

$20.00

$2,000.00

DI RECT MATERI ALS

FI NI SHI NG

Quantity

Unit Costs

100

$1.00

CUTTI NG ASSEMBLI NG

$3,000.00 $250.00 $1,200.00

100

$15.00 $5.00 $12.00

200 50

$400.00 $100.00 $200.00 APPLI ED OVERHEAD

4/ 15/ 94

22

CUMULATI VE TOTAL

CUMULATI VE UNI T TOTAL

DEPARTMENTAL COST

$ 2 Per Direct

Labor Hour

Cost f or 100 Desks

RateDI RECT LABOR

Hours

$5,400.00 $450.00 $1,900.00

5/ 15/ 94

100

$5.00

$500.00$100.00

Departmental Cost ( Cutting) = DM + DL + AOH $5,400 = $2,000 + $ 3,000 + $ 400

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren Corporation Job Costing Sheet

J ob Started: COMPLETI ON DATE :

J ob # : J OB DESCRI PTI ON : Wooden Desk

QUANTI TY : 100

Cost f or 100 Desks

100

$20.00

$2,000.00

DI RECT MATERI ALS

FI NI SHI NG

Quantity

Unit Costs

100

$1.00

CUTTI NG ASSEMBLI NG

$3,000.00 $250.00 $1,200.00

100

$15.00 $5.00 $12.00

200 50

$400.00 $100.00 $200.00 APPLI ED OVERHEAD

4/ 15/ 94

22

CUMULATI VE TOTAL

CUMULATI VE UNI T TOTAL

DEPARTMENTAL COST

$ 2 Per Direct

Labor Hour

Cost f or 100 Desks

RateDI RECT LABOR

Hours

$5,400.00

$5,400.00

$450.00

$5,850.00

$1,900.00

$7,750.00

5/ 15/ 94

100

$5.00

$500.00$100.00

Cum Tot (Finishing)= Dept Cost (Finsh) +Cum Tot (Asm) $7,750 = $ 1,900 +$5,850

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren Corporation Job Costing Sheet

J ob Started: COMPLETI ON DATE :

J ob # : J OB DESCRI PTI ON : Wooden Desk

QUANTI TY : 100

Cost f or 100 Desks

100

$20.00

$2,000.00

DI RECT MATERI ALS

FI NI SHI NG

Quantity

Unit Costs

100

$1.00

CUTTI NG ASSEMBLI NG

$3,000.00 $250.00 $1,200.00

100

$15.00 $5.00 $12.00

200 50

$400.00 $100.00 $200.00 APPLI ED OVERHEAD

4/ 15/ 94

22

CUMULATI VE TOTAL

CUMULATI VE UNI T TOTAL

DEPARTMENTAL COST

$ 2 Per Direct

Labor Hour

Cost f or 100 Desks

RateDI RECT LABOR

Hours

$5,400.00

$5,400.00

$54.00

$450.00

$5,850.00

$58.50

$1,900.00

$7,750.00

$77.50

5/ 15/ 94

100

$5.00

$500.00$100.00

Cum Unit Cost = Cum Tot Qty$77.50 = $ 7,750 100

Managerial AccountingManagerial AccountingConcepts and Empirical EvidenceConcepts and Empirical Evidence

Ren Corporation Job Costing Sheet

J ob Started: COMPLETI ON DATE :

J ob # : J OB DESCRI PTI ON : Wooden Desk

QUANTI TY : 100

Cost f or 100 Desks

100

$20.00

$2,000.00

DI RECT MATERI ALS

FI NI SHI NG

Quantity

Unit Costs

100

$1.00

CUTTI NG ASSEMBLI NG

$3,000.00 $250.00 $1,200.00

100

$15.00 $5.00 $12.00

200 50

$400.00 $100.00 $200.00 APPLI ED OVERHEAD

4/ 15/ 94

22

CUMULATI VE TOTAL

CUMULATI VE UNI T TOTAL

DEPARTMENTAL COST

$ 2 Per Direct

Labor Hour

Cost f or 100 Desks

RateDI RECT LABOR

Hours

$5,400.00

$5,400.00

$54.00

$450.00

$5,850.00

$58.50

$1,900.00

$7,750.00

$77.50

5/ 15/ 94

100

$5.00

$500.00$100.00