chap 001 cost
TRANSCRIPT
-
8/9/2019 Chap 001 COST
1/61
PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D., CPA, CIA
Cnthia J. !oone, Ph.D., CPAMcGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies Inc! "ll rights reser#e$!
Mana"erial A##ountin" and
Cost Con#e$tsCha$ter %&
-
8/9/2019 Chap 001 COST
2/61
1-2
'earnin" (b)e#ti*e &
Identify and give
examples of each of thethree basic
manufacturing cost
categories.
-
8/9/2019 Chap 001 COST
3/61
1-3
The ProductThe Product
Dire#tMaterials
Dire#tMaterials
Dire#t'abor
Dire#t'abor
Manu+a#turin"(*erhead
Manu+a#turin"(*erhead
Classi+i#ations o+ Manu+a#turin"
Costs
-
8/9/2019 Chap 001 COST
4/61
1-4
Dire#t Materials
!aw materials that be#ome an inte"ral$art o+ the $rodu#t and that #an be#on*enientl tra#ed dire#tl to it.
Example: A radio installed in an automobile
Example: A radio installed in an automobile
-
8/9/2019 Chap 001 COST
5/61
1-5
Dire#t 'abor
hose labor #osts that #an be easiltra#ed to indi*idual units o+ $rodu#t.
Example: Wages paid to automobile assembly worers
Example: Wages paid to automobile assembly worers
-
8/9/2019 Chap 001 COST
6/61
1-6
Manu+a#turin" (*erhead
Manu+a#turin" #osts that #annotbe easiltra#ed dire#tl to s$e#i+i# units $rodu#ed.
Examples: Indirect materials and indirect labor
Examples: Indirect materials and indirect labor
-
8/9/2019 Chap 001 COST
7/611-7
-onmanu+a#turin" Costs
Administrative!osts
All executive"
organi#ational" andclerical costs.
-
8/9/2019 Chap 001 COST
8/611-8
'earnin" (b)e#ti*e
$istinguish between
product costs andperiod costs and give
examples of each.
-
8/9/2019 Chap 001 COST
9/611-9
Produ#t Costs /ersus Period Costs
Product costs includedirect materials" direct
labor" and
manufacturingoverhead.
Period costsinclude allselling costs and
administrative costs.
Inventory !ost of %ood &old
Balan#eSheet
In#omeStatement
&ale
Expense
In#omeStatement
-
8/9/2019 Chap 001 COST
10/611-10
0ui#k Che#k
Whi#h o+ the +ollowin" #osts would be #onsidereda $eriod rather than a $rodu#t #ost in amanu+a#turin" #om$an1
A. Manu+a#turin" e2ui$ment de$re#iation.B. Pro$ert ta3es on #or$orate head2uarters.
C. Dire#t materials #osts.
D. 4le#tri#al #osts to li"ht the $rodu#tion
+a#ilit.
4. Sales #ommissions.
-
8/9/2019 Chap 001 COST
11/611-11
0ui#k Che#k
Whi#h o+ the +ollowin" #osts would be #onsidereda $eriod rather than a $rodu#t #ost in amanu+a#turin" #om$an1
A. Manu+a#turin" e2ui$ment de$re#iation.B. Pro$ert ta3es on #or$orate head2uarters.
C. Dire#t materials #osts.
D. 4le#tri#al #osts to li"ht the $rodu#tion
+a#ilit.
4. Sales #ommissions.
-
8/9/2019 Chap 001 COST
12/611-12
Classi+i#ations o+ Costs
Manu+a#turin" #osts are o+ten#lassi+ied as +ollows:
Dire#tMaterial
Dire#t'abor
Manu+a#turin"(*erhead
PrimeCost
Con*ersionCost
-
8/9/2019 Chap 001 COST
13/611-13
'earnin" (b)e#ti*e 5
'nderstand cost
behavior patternsincluding variable costs"fixed costs" and mixed
costs.
-
8/9/2019 Chap 001 COST
14/611-14
Cost Classi+i#ations +or Predi#tin" Cost
Beha*ior Cost beha*ior re+ers tohow a #ost will rea#t to#han"es in the le*el o+
a#ti*it. he most#ommon #lassi+i#ationsare:
(ariable costs
)ixed costs
*ixed costs
-
8/9/2019 Chap 001 COST
15/611-15
/ariable Cost
6our total texting bill is based on howman te3ts ou send.
+umber of Texts &ent
Total
Texting,ill
-
8/9/2019 Chap 001 COST
16/611-16
/ariable Cost Per 7nit
he cost per text sent is #onstant at
8 #ents $er te3t messa"e.
+umber of Texts &ent
!ostP
erText&ent
-
8/9/2019 Chap 001 COST
17/61
1-17
he A#ti*it Base 9Cost Dri*er
A measure o+ what#auses the
in#urren#e o+ a*ariable #ost
7nits$rodu#ed
Milesdri*en
Ma#hine;hours
'abor;hours
-
8/9/2019 Chap 001 COST
18/61
1-18
-
8/9/2019 Chap 001 COST
19/61
1-19
-
8/9/2019 Chap 001 COST
20/61
1-20
43am$lesAd*ertisin" and
!esear#h andDe*elo$ment
43am$lesDe$re#iation on Buildin"sand 42ui$ment and !eal
4state a3es
$es o+
-
8/9/2019 Chap 001 COST
21/61
1-21
!ele*ant!an"e
A strai"ht line#losel
a$$ro3imates a#ur*ilinear
*ariable #ostline within therele*ant ran"e.
A strai"ht line#losel
a$$ro3imates a#ur*ilinear
*ariable #ostline within the
rele*ant ran"e.
A#ti*it
,o
talCost
4#onomist=sCur*ilinear Cost
-
8/9/2019 Chap 001 COST
22/61
1-22
-
8/9/2019 Chap 001 COST
23/61
1-23
!ent
Costin,ho
usands
o+Dollars
% &,%%% ,%%% 5,%%%!ented Area 9S2uare
-
8/9/2019 Chap 001 COST
24/61
1-24
Cost Classi+i#ations +or Predi#tin" Cost
Beha*ior
-
8/9/2019 Chap 001 COST
25/61
1-25
0ui#k Che#k
Whi#h o+ the +ollowin" #osts would be *ariable with res$e#tto the number o+ #ones sold at a Baskins !obbins sho$19here ma be more than one #orre#t answer.
A. he #ost o+ li"htin" the store.B. he wa"es o+ the store mana"er.
C. he #ost o+ i#e #ream.
D. he #ost o+ na$kins +or #ustomers.
-
8/9/2019 Chap 001 COST
26/61
1-26
Whi#h o+ the +ollowin" #osts would be *ariable with res$e#tto the number o+ #ones sold at a Baskins !obbins sho$19here ma be more than one #orre#t answer.
A. he #ost o+ li"htin" the store.B. he wa"es o+ the store mana"er.
C. he #ost o+ i#e #ream.
D. he #ost o+ na$kins +or #ustomers.
0ui#k Che#k
-
8/9/2019 Chap 001 COST
27/61
1-27
-
8/9/2019 Chap 001 COST
28/61
1-28
Mi3ed Costs
-
8/9/2019 Chap 001 COST
29/61
1-29
Mi3ed Costs E An 43am$le
I+ our +i3ed monthl utilit #har"e is >F%, ourI+ our +i3ed monthl utilit #har"e is >F%, our*ariable #ost is >%.%5 $er kilowatt hour, and our*ariable #ost is >%.%5 $er kilowatt hour, and our
monthl a#ti*it le*el is ,%%% kilowatt hours, what ismonthl a#ti*it le*el is ,%%% kilowatt hours, what isthe amount o+ our utilit bill1the amount o+ our utilit bill1
-
8/9/2019 Chap 001 COST
30/61
1-30
Analsis o+ Mi3ed Costs
InIn account analysisaccount analysis, ea#h a##ount is, ea#h a##ount is#lassi+ied as either *ariable or +i3ed based#lassi+ied as either *ariable or +i3ed based
on the analston the analst=s knowled"e o+ how=s knowled"e o+ howthe a##ount beha*es.the a##ount beha*es.
InIn account analysisaccount analysis, ea#h a##ount is, ea#h a##ount is#lassi+ied as either *ariable or +i3ed based#lassi+ied as either *ariable or +i3ed based
on the analston the analst=s knowled"e o+ how=s knowled"e o+ howthe a##ount beha*es.the a##ount beha*es.
he engineering approach#lassi+ies
#osts based u$on an industrialen"ineer=s e*aluation o+ $rodu#tionmethods, and material, labor, and
o*erhead re2uirements.
he engineering approach#lassi+ies
#osts based u$on an industrialen"ineer=s e*aluation o+ $rodu#tionmethods, and material, labor, and
o*erhead re2uirements.
A##ount Analsis and the 4n"ineerin" A$$roa#hA##ount Analsis and the 4n"ineerin" A$$roa#hA##ount Analsis and the 4n"ineerin" A$$roa#hA##ount Analsis and the 4n"ineerin" A$$roa#h
-
8/9/2019 Chap 001 COST
31/61
1-31
'earnin" (b)e#ti*e F
Analy#e a mixed cost
using a scattergraph plotand the highlow
method.
-
8/9/2019 Chap 001 COST
32/61
1-32
S#atter"ra$h Plots E An 43am$leAssume the +ollowin" hours o+ maintenan#e work and the total maintenan#e #osts +or si3 months.
-
8/9/2019 Chap 001 COST
33/61
1-33
Plot the data $oints on a "ra$h9otal Cost Y*s. A#ti*it X.
Plot the data $oints on a "ra$h9otal Cost Y*s. A#ti*it X.
he S#atter"ra$h Method
-
/
ours o+ Maintenan#e
,otalM
aintenan#eCost
-
8/9/2019 Chap 001 COST
34/61
1-34
he i"h;'ow Method E An
43am$lehehe variable costvariable cost
per hourper houro+o+
maintenan#e ismaintenan#e ise2ual to the #han"ee2ual to the #han"e
in #ost di*ided bin #ost di*ided b
the #han"e in hours.the #han"e in hours.
hehe variable costvariable costper hourper houro+o+
maintenan#e ismaintenan#e is
e2ual to the #han"ee2ual to the #han"ein #ost di*ided bin #ost di*ided b
the #han"e in hours.the #han"e in hours.
>?.%%Hhour>?.%%Hhour>,F%%
F%%
-
8/9/2019 Chap 001 COST
35/61
1-35
he i"h;'ow Method E An
43am$le
otal ?Hhour 8% hours 8% hours
otal @,%% E >8,&%%otal @,%% E >8,&%%
otal F,K%%
-
8/9/2019 Chap 001 COST
36/61
1-36
he i"h;'ow Method E An
43am$le
YY >F,K%% L >?.%% >F,K%% L >?.%%XX
he Cost 42uation +or Maintenan#e
-
8/9/2019 Chap 001 COST
37/61
1-37
0ui#k Che#k
Sales salaries and #ommissions are >&%,%%%when %,%%% units are sold, and >&F,%%% when&%,%%% units are sold. 7sin" the hi"h;lowmethod, what is the*ariable$ortion o+ salessalaries and #ommission1
a. >%.% $er unit
b. >%.&% $er unit
#. >%.& $er unitd. >%.&8 $er unit
-
8/9/2019 Chap 001 COST
38/61
1-38
Sales salaries and #ommissions are >&%,%%%when %,%%% units are sold, and >&F,%%% when&%,%%% units are sold. 7sin" the hi"h;lowmethod, what is the*ariable$ortion o+ sales
salaries and #ommission1a. >%.% $er unit
b. >%.&% $er unit
#. >%.& $er unit
d. >%.&8 $er unit
0ui#k Che#k
'nits !ost
0igh level 123"333 14"3335
6ow level 73"333 13"333!hange 43"333 4"3335
-
8/9/2019 Chap 001 COST
39/61
1-39
0ui#k Che#k
Sales salaries and #ommissions are >&%,%%%when %,%%% units are sold, and >&F,%%% when&%,%%% units are sold. 7sin" the hi"h;lowmethod, what is the +i3ed $ortion o+ salessalaries and #ommissions1
a. > ,%%%
b. > F,%%%
#. >&%,%%%d. >&,%%%
Sales salaries and #ommissions are >&%,%%%when %,%%% units are sold, and >&F,%%% when&%,%%% units are sold. 7sin" the hi"h;lowmethod, what is the +i3ed$ortion o+ salessalaries and #ommissions1
a. > ,%%%
b. > F,%%%
#. >&%,%%%d. >&,%%%
-
8/9/2019 Chap 001 COST
40/61
1-40
Sales salaries and #ommissions are >&%,%%%when %,%%% units are sold, and >&F,%%% when&%,%%% units are sold. 7sin" the hi"h;lowmethod, what is the +i3ed $ortion o+ salessalaries and #ommissions1
a. > ,%%%
b. > F,%%%
#. >&%,%%%d. >&,%%%
Sales salaries and #ommissions are >&%,%%%when %,%%% units are sold, and >&F,%%% when&%,%%% units are sold. 7sin" the hi"h;lowmethod, what is the +i3ed$ortion o+ salessalaries and #ommissions1
a. > ,%%%
b. > F,%%%
#. >&%,%%%d. >&,%%%
0ui#k Che#k
-
8/9/2019 Chap 001 COST
41/61
1-41
'east;S2uares !e"ression Method
A method used to anale mi3ed #osts i+ as#atter"ra$h $lot re*eals an a$$ro3imatel linear
relationshi$ between theXand Y*ariables.
his method useshis method uses allallo+ theo+ thedata $oints to estimatedata $oints to estimatethe +i3ed and *ariablethe +i3ed and *ariable
#ost #om$onents o+ a#ost #om$onents o+ ami3ed #ost.mi3ed #ost.
his method useshis method uses allallo+ theo+ thedata $oints to estimatedata $oints to estimate
the +i3ed and *ariablethe +i3ed and *ariable#ost #om$onents o+ a#ost #om$onents o+ a
mi3ed #ost.mi3ed #ost. he "oal o+ this method ishe "oal o+ this method isto +it a strai"ht line to theto +it a strai"ht line to the
data thatdata that minimizes theminimizes the
sum of the squared errorssum of the squared errors..
he "oal o+ this method ishe "oal o+ this method is
to +it a strai"ht line to theto +it a strai"ht line to thedata thatdata that minimizes theminimizes the
sum of the squared errorssum of the squared errors..
-
8/9/2019 Chap 001 COST
42/61
1-42
'east;S2uares !e"ression Method
So+tware #an be used to +it a re"ression linethrou"h the data $oints.
he #ost analsis ob)e#ti*e is the same:
Y8 a9 bX
'east;s2uares re"ression also $ro*ides a statisti#,
#alled the!, whi#h is a measure o+ the "oodness
o+ +it o+ the re"ression line to the data $oints.
-
8/9/2019 Chap 001 COST
43/61
1-43
Com$arin" !esults
-
8/9/2019 Chap 001 COST
44/61
1-44
'earnin" (b)e#ti*e 8
Prepare incomestatements for a
merchandising companyusing the traditional and
contribution formats.
-
8/9/2019 Chap 001 COST
45/61
1-45
he raditional and Contribution
-
8/9/2019 Chap 001 COST
46/61
1-46
7ses o+ the Contribution
-
8/9/2019 Chap 001 COST
47/61
1-47
'earnin" (b)e#ti*e ?
'nderstand the
differences betweendirect and indirect costs.
-
8/9/2019 Chap 001 COST
48/61
1-48
Assi"nin" Costs to Cost (b)e#ts
$irect costs
!osts that can beeasily and
conveniently tracedto a unit of productor other cost obect.
Examples: direct
material and directlabor
Indirect costs
!osts that cannotbe easily and
conveniently tracedto a unit of productor other cost obect.
Example:
manufacturingoverhead
-
8/9/2019 Chap 001 COST
49/61
1-49
'earnin" (b)e#ti*e K
'nderstand costclassifications used in
maing decisions:differential costs"
opportunity costs" andsun costs.
-
8/9/2019 Chap 001 COST
50/61
1-50
Cost Classi+i#ations +or De#isionMakin"
4*er de#ision in*ol*es a #hoi#ebetween at least two alternati*es.
(nl those #osts and bene+its thatdi++er between alternati*es are rele*antin a de#ision. All other #osts and
bene+its #an and should be i"nored asirrele*ant.
-
8/9/2019 Chap 001 COST
51/61
1-51
Di++erential Cost and !e*enue
Costs and re*enues that di++er amon" alternati*es.
Example: /ou have a ob paying 51";33 per month inyour hometown. /ou have a ob offer in a neighboringcity that pays 52"333 per month. The commuting costto the city is 5
-
8/9/2019 Chap 001 COST
52/61
1-52
($$ortunit Cost
The potential benefit that is givenup when one alternative is
selected over another.
43am$le: I+ ou werenot attendin" #olle"e,ou #ould be earnin"
>&8,%%% $er ear.6our o$$ortunit #osto+ attendin" #olle"e +orone ear is >&8,%%%.
-
8/9/2019 Chap 001 COST
53/61
1-53
Sunk Costs
Sunk #osts ha*e alread been in#urred and #annot be#han"ed now or in the +uture. hese #osts should be
i"nored when makin" de#isions.
43am$le: Su$$ose ou had $ur#hased "old +or
>F%% an oun#e, but now it is sellin" +or >8% anoun#e. Should ou wait +or the "old to rea#h >F%% anoun#e be+ore sellin" it1 6ou ma sa, N6esO e*enthou"h the >F%% $ur#hase is a sunk #ost.
-
8/9/2019 Chap 001 COST
54/61
1-54
0ui#k Che#k
Su$$ose ou are trin" to de#ide whether to dri*e or takethe train to Portland to attend a #on#ert. 6ou ha*e am$le#ash to do either, but ou don=t want to waste moneneedlessl. Is the #ost o+ the train ti#ket rele*ant in this
de#ision1 In other words, should the #ost o+ the train ti#keta++e#t the de#ision o+ whether ou dri*e or take the train toPortland1
A. 6es, the #ost o+ the train ti#ket is rele*ant.
B. -o, the #ost o+ the train ti#ket is not rele*ant.
-
8/9/2019 Chap 001 COST
55/61
1-55
Su$$ose ou are trin" to de#ide whether to dri*e or takethe train to Portland to attend a #on#ert. 6ou ha*e am$le#ash to do either, but ou don=t want to waste moneneedlessl. Is the #ost o+ the train ti#ket rele*ant in this
de#ision1 In other words, should the #ost o+ the train ti#keta++e#t the de#ision o+ whether ou dri*e or take the train toPortland1
A. 6es, the #ost o+ the train ti#ket is rele*ant.
B. -o, the #ost o+ the train ti#ket is not rele*ant.
0ui#k Che#k
-
8/9/2019 Chap 001 COST
56/61
1-56
0ui#k Che#k
Su$$ose ou are trin" to de#ide whether to dri*e or takethe train to Portland to attend a #on#ert. 6ou ha*e am$le#ash to do either, but ou don=t want to waste moneneedlessl. Is the annual #ost o+ li#ensin" our #ar
rele*ant in this de#ision1A. 6es, the li#ensin" #ost is rele*ant.
B. -o, the li#ensin" #ost is not rele*ant.
-
8/9/2019 Chap 001 COST
57/61
1-57
Su$$ose ou are trin" to de#ide whether to dri*e or takethe train to Portland to attend a #on#ert. 6ou ha*e am$le#ash to do either, but ou don=t want to waste moneneedlessl. Is the annual #ost o+ li#ensin" our #ar
rele*ant in this de#ision1A. 6es, the li#ensin" #ost is rele*ant.
B. -o, the li#ensin" #ost is not rele*ant.
0ui#k Che#k
-
8/9/2019 Chap 001 COST
58/61
1-58
0ui#k Che#k
Su$$ose that our #ar #ould be sold now +or >8,%%%. Isthis a sunk #ost1
A. 6es, it is a sunk #ost.
B. -o, it is not a sunk #ost.
-
8/9/2019 Chap 001 COST
59/61
1-59
Su$$ose that our #ar #ould be sold now +or >8,%%%. Isthis a sunk #ost1
A. 6es, it is a sunk #ost.
B. -o, it is not a sunk #ost.
0ui#k Che#k
-
8/9/2019 Chap 001 COST
60/61
1-60
Summar o+ the $es o+ CostClassi+i#ations
)inancial)inancial
>eporting>eportingPredicting !ostPredicting !ost
,ehavior,ehavior
Assigning !ostsAssigning !oststo !ost ?bectsto !ost ?bects
*aing ,usiness*aing ,usiness$ecisions$ecisions
-
8/9/2019 Chap 001 COST
61/61
4nd o+ Cha$ter %&