7/23/2019 Chap 002 Garrision Pres
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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$tsChapter 02
7/23/2019 Chap 002 Garrision Pres
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The ProductThe Product
Dire#t
Materials
Dire#t
MaterialsDire#t
'abor
Dire#t
'abor Manu(a#turin"
)*erhead
Manu(a#turin"
)*erhead
Classifications of Manufacturing Costs
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Direct Materials
!aw materials that be#ome an inte"ral$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
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Direct Labor
-hose labor #osts that #an be easiltra#ed to indi*idual units o( $rodu#t.
Example: Wages paid to automobile assembly workers
Example: Wages paid to automobile assembly workers
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Manufacturing Overhead
Manu(a#turin" #osts that #annot be easiltra#ed dire#tl to s$e#i(i# units $rodu#ed.
Examples: Indirect materials and indirect labor
Examples: Indirect materials and indirect labor
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Nonmanufacturing Costs
Administrative
Costs
All executive
organi!ational andclerical costs"
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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
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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
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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
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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
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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
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&i'ed Cost
3our monthl #ontra#t (ee (or our #ell $hone is(i4ed (or the number o( monthl minutes in our
#ontra#t. -he monthl #ontra#t (ee does not
#han"e based on the number o( #alls ou make.
&umber o# (inutes )sedWithin (onthly Plan
( o n t h l y C e l l P h o n e
C o n t r a c t * e e
% 5+
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&i'ed Cost Per Unit
Within the monthl #ontra#t allotment, the a*era"e (i4ed #ost per
cell phone call made de#reases as more #alls are made.
&umber o# (inutes )sed
Within (onthly Plan
( o n t h
l y C e l l P h o n e
C o n t r a c t * e e
% 5
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84am$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.
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!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=
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! 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.
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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
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)nd of Chapter 02