Please enable JavaScript.

Coggle requires JavaScript to display documents.

ACCT2200 (Introduction (Cost Term (Manufacturing/Nonmanufacturing…

- - - - User perspective
      - Types of reports
      - Nature of information
      - Frequency of reporting
      - Level of detail
  - - - Purpose
        
        provide useful info to internal managers to help them make decisions that arise as they manage people, projects, products, or segments of the business
      - Detailed plans & continuous performance reports
      - Internal decision makers
        
        Managers thruout the organization
        
        Less conflict of interests
      - Subjective, relevant, future oriented
    - - Periodic financial statements & related disclosures
      - External decision makers
        
        Shareholders, creditors, suppliers, customers, etc.
        
        Conflict of interests
      - Standards (GAAP, IFRS, US GAAP) -> more comparable
      - Main products
        
        Balance Sheet (Statement of Financial Position)
        
        Income statement
        
        Statement of Retained Earnings
        
        Statement of Cash Flow
      - Objective, reliable, historical
  - - - Direct: can be easily & conveniently traced to a unit of product or other cost object
      - Indirect: can NOT be
    - - Variable: change in direct proportion to changes in activity level
        (Total Variable Cost is variable, Unit Variable Cost is fixed)
      - Fixed: do NOT change in total regardless of the activity level
        (Unit Fixed Cost vary inversely with the activity level)
    - - Manufacturing: include all costs incurred to produce the physical product
        
        Direct Materials
        
        Major material inputs, direct
        
        Direct Labor
        
        E.g. Wages
        
        Manufacturing overhead
        
        Indirect materials
        
        Indirect labors
        
        Maintenance and repairs on production equipment
        
        Utilities
        
        Property taxes
        
        Depreciation
        
        Insurance
        
        Prime cost = Direct Materials + Direct Labor
        
        If leaning towards prime cost: variable cost driven cost structure
        
        Conversion cost = Direct Labor + Manufacturing Overhead
        
        If leaning towards conversion cost: fixed cost driven cost structure
        
        Product Cost -> goes into COGS (not recognized until you sell the product)
      - Nonmanufacturing costs
        
        Marketing or Selling Costs: costs necessary to get the order and deliver the product
        
        General & Administrative Costs: all executive, organizational & clerical costs; R&D
        
        Period Cost -> Period expenses
      - Spend a lot on manufacturing but COGS low? -> a lot of inventories
    - - Relevant: potential to influence the decision. 1. Differ bt/w alternatives(differential costs) 2. incurred in the future
- - - - Scattergraph
      - High-low
        
        for Activity level
      - Least-squares regression
      - Total fixed cost & variable cost per unit
  - - - Contribution Margin
      - Internal decision making
      - Treatment of fixes MO: expensed during the period incurred
    - - COGS
      - Gross Margin
- - - - Job Cost Sheet
        
        Direct materials
        
        Materials Requisition Form
        
        Direct labor
        
        Labor Time Ticket
        
        Manufacturing overhead
        
        Predetermined overhead rate (POHR)
        
        POHR=Estimated total MO cost/Estimated total cost driver
        
        Allocation base (cost driver)
        
        For manufacturer
        
        Direct material, direct labor hour, direct labor dollar, machine hours
        
        For service firm
        
        billable hours
        
        Applied Manufacturing Overhead
        
        = POHR *Actual cost driver
      - Jobs: unique products/services
      - Flow
        
        Raw material -> [Indirect goes to MO account] Direct: Work in process inventory(Applied MO) -> Finished goods inventory -> Cost of goods sold (Underapplied / Overapplied)
        
        COG Manufactured Report
        
        COG Manufactured = Total Manufacturing costs + BGN WIP Inv - END WIP Inv
        
        Total Manufacturing costs = DM + DL + Applied MO
        
        DM = BGN Raw Mat Inv + Raw Mat Purchase - Indirect Mat - END Raw Mat Inv
        
        So -> Cost of goods manufactured is based on Applied MO
        
        Income Statement
        
        Operating profit = Gross profit - S,G&A
        
        Gross profit = Sales revenue - COGS
        
        COGS = Unadjusted COGS + Underapplied MO or - Overapplied MO
        
        Unadjusted COGS = BGN finisheds good inv + COG Manufactured - END finished goods inv
    - - Flow
        
        Same accounts as Job order costing, but may have more as of the # of WIP accounts
        
        Raw material -> WIP Inv (+ conversion costs) -> Finished goods Inv -> COGS
      - Production report
        
        the # of units
        
        total # of units worked on
        
        the # of units completed
        
        the # of units remaining in process
        
        1 = 2 + 3
        
        Cost
        
        manu costs transferred from WIP to Finished Goods Inv
        
        Cost of units remaining in process
        
        4 = 5 + 6
        
        total manu costs (BGN + current)
        
        the # of physical units 2. physical -> equivalent 3. cost per equ unit 4. total cost of WIP 5. summary
        
        Weighted Average
        
        do NOT distinguish bt/w previous and current period costs
        
        BGN + Started = Completed + END
        
        Equ Units = END WIP inv * % of completion
        
        cost per equ unit = total cost / # of equ units
        
        Assumptions
        
        direct material added at the beginning
        
        conversion costs incurred uniformly
        
        BGN Inv, started, total, Completed, END Inv, total ->
        Units accounted for, Completed, END Inv, Total, Physical, Equivalent, DM, conversion ->
        BGN cost, Current period cost, Total Costs to Account for, Equivalent Units, DM, Conversion, Cost per Equ Unit ->
        Cost to account for, prior period, current period, total to account for,
        completed cost, END Inv cost, total accounted for, DM, Conversion, Total costs accounted for
        
        FIFO
        
        Always more accurate! (more closely matches the actual flow of costs in reality)
        
        BGN + Started = Completed + END
        
        Equ Units = BGN WIP inv x (1 - % of completion) = END WIP inv x % of completion
        
        cost per equ unit = current cost / # of equ units
        
        BGN Inv, Started, Total, Physical units, Completed, END Inv, Total, Physical Units ->
        BGN Inv, Started & Completed, END Inv, Total, Physical, Equivalent, DM, Conversion ->
        Current period cost, Equ Unit, Cost per Equ unit, DM, Conversion ->
        Cost to account for, prior period, current period, total cost to account for, DM, Conversion, Total ->
        BGN Inv, (Prior period), Started & Completed, END Inv, Total cost accounted for, DM, Conversion, Total
  - - - Assign indirect costs into activity cost pools
        
        For manufacturer
        
        Facility-level, product-level, batch-level, unit-level
        
        For service firm
        
        Facility-level, Service-level, Group-level, Customer-level
      - pools -> individual product/service
        
        Cost drive for each pool
        
        Assign to products/services
        
        Activity rates
        
        Activity rate = total activity cost / total cost driver
        
        Activity proportions
        
        Volume-based
        
        number of units produced
        
        number of direct labor hours
        
        number of machine hours
        
        total direct materials cost
        
        non-volume-based
        
        number of batches/setup time
        
        processing time per unit
        
        number of quality inspections
        
        number of design changes
      - (3. calculate unit costs & gross margin)
    - - Cross subsidization
      - Incorrect pricing
      - Wrong cost control effect
  - - - How much does it cost to perform each activity?
      - Does the activity add value to the customer?
      - What activities are performed?
    - - materials are purchased and units are made only as they are needed to satisfy customer demand -> "demand pull" system
    - - Improve product quality by reducing and eliminating errors, streamlining activities, continuously improving production processes
      - Prevention costs
      - Appraisal/inspection costs
      - Internal failure costs
      - External failure costs
    - - proactive approach
      - target price + desired level of profitability -> target cost -> what to do
    - - Product introduction (higher costs)
      - growth (higher costs)&(most revenue)
      - maturity (most revenue)
      - eventual decline