Chap 002 Garrision Pres

7/23/2019 Chap 002 Garrision Pres

http://slidepdf.com/reader/full/chap-002-garrision-pres 1/18

PowerPoint Authors:

Susan Coomer Galbreath, Ph.D., CPA

Charles W. Caldwell, D.B.A., CMA

Jon A. Booker, Ph.D., CPA, CIA

Cnthia J. !oone, Ph.D., CPA

Mana"erial A##ountin" and Cost

Con#e$tsChapter 02



%&%

The ProductThe Product

Dire#t

Materials

Dire#t

MaterialsDire#t

'abor

Dire#t

'abor Manu(a#turin"

)*erhead

Manu(a#turin"

)*erhead

Classifications of Manufacturing Costs



%&+

Direct 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



%&

Direct Labor

-hose labor #osts that #an be easiltra#ed to indi*idual units o( $rodu#t.

Example: Wages paid to automobile assembly workers

Example: Wages paid to automobile assembly workers



%&

Manufacturing Overhead

Manu(a#turin" #osts that #annot be easiltra#ed dire#tl to s$e#i(i# units $rodu#ed.

Examples: Indirect materials and indirect labor

Examples: Indirect materials and indirect labor



%&/

Nonmanufacturing Costs

Administrative

Costs

All executive

organi!ational andclerical costs"



%&0

Product Costs Versus Period Costs

Product costs include

direct materials direct

labor and

manu#acturingoverhead"

Period costs include all

selling costs and

administrative costs"

Inventory Cost o# $ood %old

Balan#e

Sheet

In#ome

Statement

Sale

Expense

In#ome

Statement



%&1

Classifications of Costs

Manu(a#turin" #osts are o(ten

#lassi(ied as (ollows:

Dire#tMaterialDire#t

MaterialDire#t'abor Dire#t'abor

Manu(a#turin")*erhead

Manu(a#turin")*erhead

Prime

Cost

Con*ersion

Cost



%&2

Variable Cost

3our total texting bill is based on how

man te4ts ou send.

&umber o# Texts %ent

T o t a l

T e x t i n g ' i l l



%&56

Variable Cost Per Unit

-he cost per text sent is #onstant at

#ents $er te4t messa"e.

&umber o# Texts %ent

C o s t P

e r T e x t % e n t



%&55

he !ctivit" #ase $Cost Driver%

A measure o( what#auses the

in#urren#e o( a

*ariable #ost

7nits

$rodu#ed

Miles

dri*en

Ma#hine

hours

'abor

hours



%&5%

&i'ed Cost

3our monthl #ontra#t (ee (or our #ell $hone is(i4ed (or the number o( monthl minutes in our

#ontra#t. -he monthl #ontra#t (ee does not

#han"e based on the number o( #alls ou make.

&umber o# (inutes )sedWithin (onthly Plan

( o n t h l y C e l l P h o n e

C o n t r a c t * e e

% 5+



%&5+

&i'ed Cost Per Unit

Within the monthl #ontra#t allotment, the a*era"e (i4ed #ost per

cell phone call made de#reases as more #alls are made.

&umber o# (inutes )sed

Within (onthly Plan

( o n t h

l y C e l l P h o n e

C o n t r a c t * e e

% 5



%&5

84am$les

Ad*ertisin" and!esear#h andDe*elo$ment

84am$les

De$re#iation on Buildin"sand 89ui$ment and !eal

8state -a4es

"pes of &i'ed Costs

Dis#retionar

Ma be altered in the

short&term b #urrentmana"erial de#isions

Committed

'on"&term, #annot be

si"ni(i#antl redu#ed inthe short term.

% 5



%&5

!ele*ant

!an"e

A strai"ht line

#losel

a$$ro4imates a

#ur*ilinear

*ariable #ostline within the

rele*ant ran"e.

A strai"ht line

#losel

a$$ro4imates a

#ur*ilinear

*ariable #ost

line within the

rele*ant ran"e.

A#ti*it

- o

t a l C o s t

8#onomists

Cur*ilinear Cost

;un#tion

he Linearit" !ssumption and the (elevant

(ange

A##ountants Strai"ht&'ine

A$$ro4imation <#onstantunit *ariable #ost=

% 5/



%&5/

! e n t

C o s t i n - h o

u s a n d s

o ( D o l l a r s

6 5,666 %,666 +,666

!ented Area <S9uare ;eet=

6

+6

/6

&i'ed Costs and the (elevant (ange

26

!ele*ant

!an"e

-he rele*ant ran"e

o( a#ti*it (or a (i4ed

#ost is the ran"e o(

a#ti*it o*er whi#h

the "ra$h o( the

#ost is (lat.

% 50



%&50

Mi'ed Costs

;i4ed Monthl

7tilit Char"e

>ariable

Cost $er ?W

A#ti*it <?ilowatt @ours=

- o t a l

7 t i l i t C o s t

+

3

- o t a l

m i 4 e

d # o s

t

% 51



%&51

)nd of Chapter 02

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Chap 002 Garrision Pres