Bài giảng Chapter 2: Managerial Accounting and Cost Concepts
Chapter 2: Managerial Accounting and Cost Concepts This chapter explains how managers need to rely on different cost classifications for different purposes. The four main purposes emphasized in this chapter include preparing external financial reports, predicting cost behavior, assigning costs to cost objects, and decision making. We’ll begin by looking at manufacturing companies because their basic activities include most of the activities found in other types of business organizations.
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Managerial Accounting and Cost ConceptsChapter 2Learning Objective 2-1Identify and give examples of each of the three basic manufacturing cost categories.The ProductClassifications of Manufacturing CostsDirect MaterialsManufacturing OverheadDirect LaborDirect Materials Raw materials that become an integral part of the product and that can be conveniently traced directly to it.Example: The flour in the dough.Direct LaborThose labor costs that can be easily traced to individual units of product.Example: Wages paid to bakers.Manufacturing OverheadManufacturing costs that cannot be easily traced directly to specific units produced.Examples: Indirect materials and indirect laborMaterials used to support the production process. Examples: lubricants and cleaning supplies to maintain the bakery equipment.Classification of Nonmanufacturing CostsSelling CostsCosts necessary to secure the order and deliver the product.Administrative CostsAll executive, organizational, and clerical costs.Learning Objective 2-2Distinguish between product costs and period costs and give examples of each.Product Costs Versus Period Costs Product costs include direct materials, direct labor, and manufacturing overhead.Period costs include all selling costs and administrative costs. InventoryCost of Good SoldBalance SheetIncome StatementSaleExpenseIncome StatementClassifications of CostsManufacturing costs are often classified as follows:Direct MaterialDirect LaborManufacturing OverheadPrime CostConversion CostLearning Objective 2-3Understand cost behavior patterns including variable costs, fixed costs, and mixed costs.Cost Classifications for Predicting Cost BehaviorCost behavior refers to how a cost will react to changes in the level of activity. The most common classifications are:Variable costs.Fixed costsMixed costs.Variable Cost A cost that varies, in total, in direct proportion to changes in the level of activity. In some cases your total texting bill is based on how many texts you send.Number of Texts SentTotal Texting BillVariable Cost Per Unit However, variable cost per unit is constant. In some cases the cost per text sent is constant at constant cost per text.Number of Texts SentCost Per Text SentThe Activity Base (Cost Driver)A measure of what causes the incurrence of a variable costLabor hoursUnits producedMachine hoursMiles drivenFixed Cost A cost that remains constant, in total, regardless of changes in the level of the activity. However, if expressed on a per unit basis, the average fixed cost per unit varies inversely with changes in activity.Number of Minutes Used Within Monthly PlanMonthly Cell Phone Contract Fee Fixed Cost Per UnitHowever, if expressed on a per unit basis, the average fixed cost per unit varies inversely with changes in activity.Number of Minutes Used Within Monthly PlanMonthly Cell Phone Contract FeeExamplesAdvertising and Research and DevelopmentExamplesDepreciation on Buildings and Equipment and Real Estate TaxesTypes of Fixed CostsDiscretionaryMay be altered in the short-term by current managerial decisionsCommittedLong-term, cannot be significantly reduced in the short term.End of Chapter 2
