Cost Concepts Building Blocks (S) - 1
Cost Concepts Building Blocks (S) - 1
Cost Concepts Building Blocks (S) - 1
Management Accounting
2020
BUILDING BLOCKS
CHAPTER 14 & 18 L01
Merchandising:
Manufacturing:
Manufacturing Activities
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Non–manufacturing Activities
Manufacturing Activities…
… incur Manufacturing or Product costs
Manufacturing Activities…
… Create three types of inventory or
Product or Manufacturing costs:
Raw Materials
Work in Process
Finished Goods
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F/S presentation
2017 2016
( in Millions)
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Remember !!
PRODUCT COST
=
MANUFACTURING COSTS
WE NEED A PROCESS TO TRACK THE COSTS OF MANUFACTURING
DM
DL WIP FG COGS
MOH
IN PROCESS COMPLETE SELL
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#2 WIPOP.+(DM USED+DL+MOH)–
WIPEND.=COGM
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Purchases 250,000
MOH
IDM 10,000
IDL 25,000
Depreciation 100,000
Utilities 250,000
Other 30,000
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940,000
WIP (end) Total (115,000)
COGM 825,000
FG (opening) 150,000
COGM 825,000
GAFS 975,000
FG (ending) (165,000)
COGS 810,000
Other Terms….
Controllable & Uncontrollable costs:
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Fixed costs….
Variable costs…
Mixed cost
• Or Semi-variable costs
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• Out-of-Pocket Costs
– Outlays of cash
• Sunk Costs
– Already incurred costs
– Conversion Costs
DL + MOH
– Prime Costs
DM + DL
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Cost definitions
# Cost PR or PC V or F DM/DL/MOH
1 Tire cost Product Cost Variable Direct Material
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F = $1350/5000 = $0.26777
$0.25
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V $1.60 $1.60
V $1.90 $1.90
Mixed Cost $0.40 $0.33
F $0.80
$0.40
M $0.16 $0.14
F 0.20 0.10
END
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