Beruflich Dokumente
Kultur Dokumente
BACC 8A
COVERAGE:
• OVERVIEW AND BACKGROUND
• COST TERMS AND CONCEPTS
WHY DO WE VENTURE INTO BUSINESS?
PROFIT
business competition
WHAT DO BUSINESSES COMPETE FOR?
CUSTOMER SATISFACTION
-the measure of how products and services supplied
by a company meet or
surpass customer expectation.
oPRODUCT CUSTOMER
oPLACE CONVENIENCE
oPRICE COST
oPROMOTION COMMUNICATION
In order to cope with the ever-changing demands of consumers…
MANAGERIAL ACCOUNTING DEFINED
COST
-the money or resources sacrificed,
forgone, or paid by a business to
achieve a specific objective
• Products
• Services
COST TERMS AND CONCEPTS
COST OBJECT
-the cost of any thing which is to be measured.
-any item such as a product, department,
customer, or a project for which cost is
determined and assigned.
COST TERMS AND CONCEPTS
COST ACCUMULATION
-accumulation of cost information
that will be done in a systematized
manner.
COST TERMS AND CONCEPTS
COST ASSIGNMENT
-the allocation of costs to the
activities or objects that triggered the
incurrence of the costs.
TYPES OF COST CLASSIFICATION
1. IN RELATION TO PRODUCTS
2. FOR EXTERNAL REPORTING PURPOSES
3. FOR PREDICTING COST BEHAVIOR
4. FOR DECISION-MAKING
1.
COST CLASSIFICATIONS RELATED TO PRODUCTS
MANUFACTURING
-the total cost of the product
COST
Direct materials
Direct labor
Manufacturing overhead
Indirect materials
Indirect labor
Other costs
1.
COST CLASSIFICATIONS RELATED TO PRODUCTS
MANUFACTURING COST
leather
sole DIRECT
rubber/plastic MATERIALS
shoe laces
glue
polishing supplies INDIRECT
cleaning supplies MATERIALS
1.
COST CLASSIFICATIONS RELATED TO PRODUCTS
MANUFACTURING COST
laborers from cutting department DIRECT
laborers from assembly department LABOR
supervisors
INDIRECT
quality inspectors LABOR
factory insurance
OTHER OVERHEAD
factory electricity
COSTS
1.
COST CLASSIFICATIONS RELATED TO PRODUCTS
PRIME COST
Direct materials
Direct labor
1.
COST CLASSIFICATIONS RELATED TO PRODUCTS
CONVERSION COST
Direct labor
Manufacturing overhead
1.
COST CLASSIFICATIONS RELATED TO PRODUCTS
MANUFACTURING COST
Direct materials
PRIME COSTS
Direct labor
Manufacturing overhead
1.
COST CLASSIFICATIONS RELATED TO PRODUCTS
MANUFACTURING COST
Direct materials
Direct labor CONVERSION
Manufacturing overhead COSTS
2.
COST CLASSIFICATIONS FOR EXTERNAL REPORTING
Period Costs
-normally referred to as operating expenses.
Product Costs
-assignable to the product which will become
an expense when the product is sold.
When the products are not yet sold, these are
considered assets.
2.
COST CLASSIFICATIONS FOR EXTERNAL REPORTING
Period Costs
EXAMPLES OF
SELLING
EXPENSES
2.
COST CLASSIFICATIONS FOR EXTERNAL REPORTING
Period Costs
EXAMPLES OF
ADMINISTRATIVE
EXPENSES
2.
COST CLASSIFICATIONS FOR EXTERNAL REPORTING
Product Costs
ASSETS-INVENTORY/
SUPPLIES
when sold
EXPENSE
3.COST CLASSIFICATIONS FOR PREDICTING COST
BEHAVIOR
Variable Costs
-variable total cost in proportion to the volume
produced
Fixed Costs
-fixed total cost
Mixed Costs
-fixed cost until it reaches a certain point where it turns
into a variable cost
3.COST CLASSIFICATIONS FOR PREDICTING COST
BEHAVIOR
Variable Costs
4 square feet per pair
x 10 planned production
40 square feet
x P500 per square foot
P 500 per square foot
P20,000
3.COST CLASSIFICATIONS FOR PREDICTING COST
BEHAVIOR
Variable Costs
4 square feet per pair
x 25 planned production
100 square feet
x P500 per square foot
P 500 per square foot
P50,000
3.COST CLASSIFICATIONS FOR PREDICTING COST
BEHAVIOR
Notice that the variable cost PER UNIT of P500
does not change (fixed) but the variable cost
IN TOTAL is variable depending on the
number of units.
4 square feet per pair 4 square feet per pair
x 10 planned production # units x 25 planned production
40 square feet 100 square feet
x P500 per square foot fixed x P500 per square foot
P20,000 variable total cost P50,000
3.COST CLASSIFICATIONS FOR PREDICTING COST
BEHAVIOR
To summarize:
variable cost PER UNIT – FIXED
variable cost IN TOTAL - VARIABLE
3.COST CLASSIFICATIONS FOR PREDICTING COST
BEHAVIOR
Fixed Costs
P 5,000 fixed tax/10
pairs, planned
production
= P500 per pair of
shoes
Fixed Costs
P 5,000 fixed tax/25
pairs, planned
production
= P200 per pair of
shoes
To summarize:
fixed cost PER UNIT – VARIABLE
fixed cost IN TOTAL - FIXED
4.
COST CLASSIFICATIONS FOR DECISION-MAKING
Differential cost
Differential revenue
Opportunity cost
Sunk cost
Avoidable cost
TRUE OR FALSE