Académique Documents
Professionnel Documents
Culture Documents
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Learning Objectives
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Cost
Cost Categories
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Treated as overhead
Allocated
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Variable cost
Fixed Cost
# of Units
# of Units
Within the
relevant range
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Variable cost
Total
Fixed Cost
$
Total
$
# of Units
Unit $
# of Units
Unit $
Within the
# of Units relevant range # of Units
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Fixed
Cost
Varies in direct
proportion to
changes in activity
Remains constant
throughout
the relevant range
Unit Cost
Remains constant
throughout the
relevant range
Varies inversely
with changes in
activity throughout
the relevant range
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Mixed Cost
variable
$
# of Units
fixed
# of Units
Within the
relevant range
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Cost Predictor
Cost Driver
Activity accompanied
by consistent,
observable changes in
a cost item
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Product Costs
Product costs
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Period Costs
Period costs
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
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2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Output
Purchase
raw materials
or supplies
Product or
Service
CONVERSION
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Degrees of Conversion
Low
Low
Department stores
Gas stations
Jewelry stores
Travel agencies
Moderate
High
Moderate
Moderate
Florists
Meat markets
Oil-change businesses
High
Manufacturing
Construction
Agriculture
Architecture
Auditing
Mining
Printing
Restaurants
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Service Company
Input
Purchase
supplies
Use supplies,
labor, overhead
to provide service
Output
Sell to
customer
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Retail Company
Input
Purchase
products
for resale
Output
Warehouse
and/or display
Sell to
customer
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Manufacturer
Significant amount of labor and machinery
Input
Tangible output
Purchase
raw materials
and supplies
Output
Finished
product
Production
Center
add labor and
overhead
Sell to
customer
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Cost Accumulation in a
Manufacturing Company
Materials
Inventory
Work in Process
Inventory
Finished Goods
Inventory
Balance Sheet
Cost of
Goods Sold
Income
Statement
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Product CostDirect
Direct Material
Direct Labor
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Product CostIndirect
Prevention costs
Appraisal costs
Failure costs
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Direct Labor
Overhead
Variable
Variable, fixed, or mixed
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Allocating Overhead
Actual Cost System
Product Cost
Cost Used
Direct Materials
Actual
Direct Labor
Actual
Overhead
Actual
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Allocating Overhead:
Actual Cost System
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Allocating Overhead:
Actual vs. Normal
Product Cost
Direct Materials
Actual Cost
System
Actual
Normal Cost
System
Actual
Direct Labor
Actual
Actual
Overhead
Actual
Predetermined
Overhead Rate
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
XXX
XXX
XXX
XXX
XXX
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
XXX
XXX
XXX
XXX
XXX
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
XXX
XXX
Matches
revenues
and
expenses
on the
income
statement
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Beginning balance
Purchases of materials
Raw materials available
Ending balance
Total raw materials used
$ 73,000
280,000
$353,000
<69,000>
$284,000
$145,000
$284,000
436,000
115,200
98,880
Income Statement
Revenue
XXXX
Cost of Goods Sold
<1,054,000>
Gross Profit
XXXX
Operating Expenses
<XXXX>
Operating Income
XXXX
Questions
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.
Ethical Issues
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.