Cost concepts, Cost Classification and Estimation
|
|
- Oscar Harper
- 6 years ago
- Views:
Transcription
1 Cost concepts, Cost Classification and Estimation BY G H A N E N DR A F A G O
2 Cost Concepts Cost refers the amount of expenses spent to generate product or services. Cost refers expenditure that may be actual or nominal expenses incurred to generate output. Cost is the value of economic resources used as result of producing or doing the things. Cost has many meaning but in management cost refers the expenditure not the price. As a manager we use cost information for taking decisions and making plans, programs and policies and strategies.
3 Cost according to elements of cost Direct material Direct labor Direct expenses Overheads
4 Cost According to function- Manufacturing Vs. Non-manufacturing costs Manufacturing Costs Manufacturing costs involves the cost of raw material, labour and use of equipment to finished goods Composed up of the following elements. Direct material Direct labour Overheads
5 Elements of Manufacturing Cost Materials Labour Overheads- indirect material labors and factory expenses
6 Non manufacturing Cost Cost other than manufacturing cost that are incurred for sale Non-manufacturing costs are: Selling expenses /marketing expenses Promotion, or Advertisement costs, Administrative costs
7 Cost according to behavior Variable cost Mixed cost Fixed cost
8 Variable costs Variable costs are based on activity. The variable costs should be zero at zero activity. They change directly with changes in activity level in a responsibility center. If output is doubled, variable expenses is to be doubled, if output increases by 15% the variable expenses also increase by 15%, if output is zero, the variable cost also zero.
9 Variable costs are usually characterized by: Unit cost remains constant. Total costs that increase as activity increases. Total costs that decrease as activity decreases. Total costs changes proportionality with changes in output.
10 Variable cost cost Variable cost 0 Units of products Variable cost per unit
11 Fixed Cost Fixed cost is also called period cost or capacity cost. It does not change in short term period or within a relevant range. They accrue primarily with the passage time. Fixed costs are caused by holding of assets and other factors of production in a state of readiness to produce.
12 Characteristics of fixed cost Unit cost increase as activities/outputs decrease. Costs that remain constant even activities are decreased or decreased Cost per unit that increases as activity decreases and vice versa Total costs that remain constant.
13 Fixed cost curve cost Fixed cost 0 Units of products
14 Committed fixed cost Committed cost arises from the ownership, facilities or possession of assets. Committed cost can not be changed by a simple decision. Major decisions to change. For example: property tax, Loan installments depreciation, insurance etc.
15 Discretionary fixed Cost Arises from management decision Controllable costs Can be easily changed by decisions Examples: Advertisement, Training costs marketing expenses, promotional expenses etc.
16 Step fixed costs Remains constant over fixed range of activities but jumps to different amount for the activities levels outside the range
17 Semi Variable Expenses/ Mixed costs Semi variable expenses also changes with changes in output or activity but not in proportion to changes in activity or output Semi variable expenses have some of the characteristics of both fixed and variable costs. Semi variable expenses are caused by combined effect of passage of time, activity or output and management discretion decisions.
18 Methods of Cost Segregation Engineering analysis Accounting analysis High Low point methods Least Square Regression Analysis
19 Engineering Analysis Systematic review of costs for product and services Measuring cost behaviors according to what cost should be, not by what have been Mixed Cost Function = Rs4,000 + Rs.600 X Per Day
20 Accounting analysis This is a simple method Segregates cost into fixed and variables based on certain cost driver.
21 Example: The Directorium Manufacturing Company produced and sold 80,000 units at Rs. 50 each. The cost for 1976 were as follows: Particular Fixed Cost Variable Cost Direct materials - Rs.200,000 Direct labour - 160,000 Manufacturing overhead Rs.440,000 20,000 Selling and admi. expenses 280, ,000 Mixed cost function = Rs.720,000 + Rs.6 X units of production
22 High Low Point method Under this method, semi variable cost can be segregated into variable and fixed cost based on the two extreme levels of activities using the following formulas. Variable rate (b) = [Cost at high point- Cost at low Point]/ [High point Low point] Fixed cost (a) = Total cost Variable rate Level of activities Therefore, the cost volume formula: Total cost activities) = Fixed cost + (Variable rate levels of
23 Advantages and Disadvantages Advantages: It is easy and less time consuming. Cost behavior is restricted to the relevant ranges. It will be more suitable when there are two levels of activities to estimate cost. Disadvantages Use of only two extreme conditions may not be representative of normal conditions It may give the unreliable estimate of fixed cost (a) and variable rate (b). It does not specify the fixed cost below and above the two levels of activities.
24 Least Square Analysis One of the best and widely used methods in cost estimation, A statistical procedure for estimating mathematically the average relationship between the dependent variable (y) and independent variable (a). It includes all the observed data and attempts to find the line of best fit in estimation of variable and fixed cost. Under this method, the following least square formula can be used to estimate cost. Y = a + bx Where, a = Estimated fixed cost i.e. constant b = Variable rate i.e. slope of regression line Y = Dependent variable i.e. estimated total cost X = Independent variable i.e. Level of activity or units of products, hours etc
25 Least Square Formula b N XY X 2 X ( X) = 2 N a= Y bx Y X 2 Y X 2 X ( X) = 2 N XY Where a= fixedcost b= varaiblerate X = levelskofkactivities
26 Regression Statistics Least square regression method is used to estimate variable and fixed cost. However, it doses not explain the accuracy and the reliability of the regression result. To explain the accuracy and reliability of the regression result, Correlation coefficient (r) and Coefficient of Determination (r2)
27 Correlation Coefficient (r) Goodness of fit regressions line can be measured by assessing correlation coefficient. The correlation coefficient can be computed as follows: Correlation coefficient (r) = Explanation: N XY X Y 2 2 ( X) N Y ( Y) The correlation coefficient measures the degree of correlation between y and x. Therefore, it should be between +1 and 1. If not, it means, it is unclear about the results. Then, coefficient of determinant should be computed to find the meaningful result using the following formula. X 2 N 2
28 Coefficient of Determination (r2) [ ] N XY X Y r2 = N X ( X) N Y ( Y) Explanation: It means that.% of the goodness of fit in regression line. Therefore, higher the degree, more the confidence in cost estimation. In other words,. % means the total variation of total cost is due to change in levels of activities and remaining in due to other factors other than the independent variable.
29 Data for total power costs and machine hours are given below: Power Costs (000 omitted) Machine Hours (000 omitted) Rs Rs hours 1. Required: a) Separate the power costs into the fixed and variable components using the method of least squares. b. Estimate the power costs when 6.5 machine hours are used. c. Compute the coefficient of determination. d. Does the regression equation need to be improved? e. t-value, e) Standard error of coefficient (S b )
30 Classification of cost according to decision making Relevant Cost and Irrelevant Cost Avoidable and Unavoidable Costs Out of pocket costs, Opportunity, Sunk costs Period Cost and Product Cost Direct Vs. Indirect cost Controllable and Uncontrollable Cost Incremental Cost/Differential Cost Committed fixed cost and Discretionary fixed Cost
31 Relevant cost Costs and expenses which are directly influenced by decision are relevant costs. All future cost are relevant cost. They are pertinent and valid costs. Relevant costs include all variable costs and additional fixed costs which are incurred because of the decision being taken
32 Irrelevant Cost In other hand, costs that cannot be changed are called irrelevant costs. Irrelevant costs include the existing fixed costs which are going to exist even after the decisions are taken. Such costs do not affect the decision
33 Controllable and Uncontrollable Cost Controllable and uncontrollable cost depends on the point of reference. Uncontrollable cost at lower level may be controllable at top level, uncontrollable in short term may be controllable in the long run. etc. A cost is a called controllable at particular level if the level has power to authorize the cost. If it has not, it is called uncontrollable cost.
34 Avoidable VS Unavoidable Costs Avoidable costs can be saved simply by not doing the alternative courses of action. They are relevant in decision making Unavoidable costs are irrelevant cost because they can not be avoided or eliminated by taking decisions or alternatives. If the revenue generated by avoidable cost is high, we have to take decisions
35 Direct Cost and Indirect Cost Direct costs are directly traceable or identifiable to a particular job or department or product and are controllable. Indirect costs are uncontrollable and no-traceable costs. Cost may be direct but the same may be indirect depends on the situation.
36 Incremental Cost/Differential Cost Cost difference between two alternatives If differential costs are increased, it is called incremental cost and decreased, and called decremental cost Incremental cost refers the only the increased cost from one alternative to another. Differential cost or incremental cost can also be used to analyses alternatives for decision-making purpose
37 Period Cost Period costs are not manufacturing cost. However, they are incurred and paid based on the period They are deductible from revenue. Example: Rent, salaries, telephone etc.
38 Product Costs Product costs are manufacturing costs They are incurred for the manufacturing of goods They include direct material, direct labour, and manufacturing overheads. Example: direct material, labour cost, manufacturing overhead etc.
39 Out of pocket expenses Expenses incurred for activities for raw materials, labour overheads etc.
40 Opportunity Cost Not recordable in the books of account but are considered in every decisions of managers. It is the amount of benefit that is sacrificed when one alternative is selected.
41 Sunk costs Costs are the cost incurred a result of past decisions. Cost can not be changed by taking operating decision Sunk costs are irrelevant from decision making. Sunk costs are depreciation of assets, lease rent etc.
COST. Labour. Direct
COMMERCIAL STUDIES STD: X Chapter 10. Fundamental Concepts of Cost Concept of Cost The term cost generally means the amount of expenditure (actual or notional) incurred on, or attributable to, a given
More informationHUM 211: Financial & Managerial Accounting
Chapter 20 HUM 211: Financial & Managerial Accounting Lecture 08: Managerial Accounting (Concepts & Principles) Masud Jahan Department of Science and Humanities Military Institute of Science and Technology
More informationCost Terms, Concepts and Classifications
Cost Terms, Concepts and Classifications 2 Cost, a frequently used word in all types of organizationsmanufacturing, non-manufacturing, business, service and retail. The process of management functions
More informationCOST SHEET. Samir K Mahajan
COST SHEET Samir K Mahajan COMPONENTS OF TOTAL COST Prime cost: It is the aggregate of direct material cost, direct labour cost and direct expenses. Prime cost or Direct cost = Direct materials + Direct
More informationChapter 2 Cost Classification & Cost Behaviour. Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing)
Chapter 2 Cost Classification & Cost Behaviour Ibrahim Sameer (MBA - Specialized in Finance, B.Com Specialized in Accounting & Marketing) Total Cost / Service Costs The total cost of making a product or
More information1. F; I 2. V ; D 3. V ; D 4. F; I 5. F; I 6. F; I 7. V ; D 8. F; I 9. F; I 10. V ; D 11. F; I 12. F; I 13. F; I 14. F; I
SOLUTIONS TO EERCISES EERCISE 2-1 (15 minutes) 1. F; I 2. V ; D 3. V ; D 4. F; I 5. F; I 6. F; I 7. V ; D 8. F; I 9. F; I 10. V ; D 11. F; I 12. F; I 13. F; I 14. F; I EERCISE 2-2 (15 minutes) 1. Product
More informationIntroduction to Cost Accounting. Samir K Mahajan
Introduction to Cost Accounting Samir K Mahajan MEANING OF COST, COSTING AND COS ACCOUNTING Cost is amount of resources given up in exchange for some goods and services. The resources given up are expressed
More informationIntroduction to Cost Accounting. Samir K Mahajan
Introduction to Cost Accounting Samir K Mahajan MEANING OF COST, COSTING AND COS ACCOUNTING Cost is amount of resources given up in exchange for some goods and services. The resources given up are expressed
More informationIntroduction to Cost Accounting. Samir K Mahajan
Introduction to Cost Accounting Samir K Mahajan MEANING OF COST, COSTING AND COS ACCOUNTING Cost is amount of resources given up in exchange for some goods and services. The resources given up are money
More informationAGENDA: JOB-ORDER COSTING
TM 3-1 AGENDA: JOB-ORDER COSTING A. The documents in a job-order costing system. 1. Materials requisition form. 2. Direct labor time ticket. 3. Job cost sheet. B. Applying overhead using a predetermined
More informationCOST OF GOODS MANUFACTURED & SOLD STATEMENT
COST OF GOODS MANUFACTURED & SOLD STATEMENT In order to understand the financial and cost statement of a concern we should clear about the procedure adopted by trading concern and manufacturing concern
More informationCOST C O S T COST 1/12/2011
Chapter 3 COST CONCEPT AND DESIGN ECONOMICS C O S T Ir. Haery Sihombing/IP Pensyarah Fakulti Kejuruteraan Pembuatan Universiti Teknologi Malaysia Melaka COST Cost is not a simple concept. It is important
More informationCOST SHEET. Samir K Mahajan
COST SHEET Samir K Mahajan COMPONENTS OF TOTAL COST Prime cost or Direct cost : It is the aggregate of direct material cost, direct labour cost and direct expenses. i.e. Prime cost or Direct cost = Direct
More informationSales salaries. Factory repairs. Advertising Office supplies used $ $
E19-4, Determine the total amount of various types of costs. Drew Company reports the following costs and expenses in May. Factory utilities $11.500 $69.100 Depreciation on factory equipment Depreciation
More informationMANAGERIAL ACCOUNTING. 2 nd topic COST CLASSIFICATION
MANAGERIAL ACCOUNTING 2 nd topic COST CLASSIFICATION Structureofthelecture2 2.1 Definition of cost and related terms 2.2 Types of cost classification 2.3 Identification of cost classification 2.4 Reporting
More informationDEFINITIONS AND CONCEPTS
DEFINITIONS AND CONCEPTS ** CONCEPTS AND DEFINITIONS IN THIS MODULE APPEAR IN VARIOUS CHAPTERS ** Key Terms and Concepts to Know Major Management Activities Planning - formulating long and short-term plans
More informationCOST CONCEPTS Introduction: Cost: Types of cost: Direct cost or explicit cost:
COST CONCEPTS Introduction: A firm carries out business to earn maximum profits. Profits are the revenues collected by a business firm after production and sale of their goods and services. But to gain
More informationREVISION: MANUFACTURING 12 SEPTEMBER 2013
REVISION: MANUFACTURING 12 SEPTEMBER 2013 Lesson Description In this lesson we: Revise ledger accounts and the production cost statement Key Concepts Ledger Accounts for Manufacturing Differences between
More informationMoore Accounting Notes
Moore Accounting Notes These notes were prepared specifically for my accounting students as a part of my teaching and preparation for the CXC CAPE [A level] Examinations in Accounting. RM ACCOUNTS ED COST
More information3. Which is not an inventory account manufacturing companies have: a) Raw Materials b) Manufacturing Overhead c) Work in Process d) Finished Goods
Chapter 1 Question Review 1. Which of the following is not a characteristic of managerial accounting: a) Emphasizes decisions affecting the future b) Mandatory for external reports c) Need not follow GAAP
More informationProblem Exercise 3-12
Exercise 3-12 1. The overhead applied to Ms. Miyami s account would be computed as follows: 2002 2001 Estimated overhead cost (a)... $144,000 $144,000 Estimated professional staff hours (b)... 2,250 2,400
More informationMultiple Choice Questions
Multiple Choice Questions 1. A cost not relevant to deciding whether to purchase a new machine is: a) The cost of the new machine b) Lower maintenance costs for the new machine c) The cost of the old machine
More informationCHAPTER ONE: OVEVIEW OF MANAGERIAL ACCOUNTING
CHAPTER ONE: OVEVIEW OF MANAGERIAL ACCOUNTING The Basic Objectives of Accounting Basic objective of accounting is to provide stakeholders with useful information about a business enterprise in order to
More informationMBP1133 Managerial Accounting Prepared by Dr Khairul Anuar
MBP1133 Managerial Accounting Prepared by Dr Khairul Anuar L2 Managerial Accounting and Costs Concepts www.notes638.wordpress.com 1 Summary of the Types of Cost Classifications Financial Reporting Predicting
More informationChapter #2: Cost Concepts and Design Economics
ENGINEERING ECONOMY Chapter #2: Cost Concepts and Design Economics By: Eng. Ahmed Y Manama Outline Fixed, Variable, and Incremental Cost Recurring and Nonrecurring Costs Direct, Indirect and Overhead Costs
More informationStudent Name: Student No.: Seat No
Hashemite University Faculty of Economic and Administrative Sciences Department of Accounting- Dr Husam Al-Khadash Course: Managerial Accounting, Course No: 0202311 - mid-term exam Student Name: Student
More informationSection A: Summary Content Notes
COST ACCOUNTING 30 JULY 2015 Section A: Summary Content Notes MANUFACTURING ACCOUNTS: NEW LEDGER ACCOUNTS New Ledger Accounts pertaining to manufacturing concerns are divided into the following categories:
More informationTM 2-1 MANUFACTURING COST CLASSIFICATIONS FOR EXTERNAL REPORTING
TM 2-1 MANUFACTURING COST CLASSIFICATIONS FOR EXTERNAL REPORTING TM 2-2 COST CLASSIFICATIONS TO PREDICT COST BEHAVIOR To predict how costs react to changes in activity, costs are often classified as variable
More informationIncremental Analysis. LO 1: Analysis
Incremental Analysis LO 1: Analysis Terms Incremental analysis Relevant cost Opportunity cost Sunk cost Analysis: Incremental analysis uses financial data that changes among alternatives to help decision
More informationTYPES OF COST CLASSIFICATIONS CLASSIFICATION BY BEHAVIOR
18-11 C 2 Cost TYPES OF COST CLASSIFICATIONS CLASSIFICATION BY BEHAVIOR Cost Activity Activity Cost Cost behavior refers to how a cost will react to changes in the level of business activity. Total fixed
More informationUNIT II THEORY OF PRODUCTION AND COST ANALYSIS
UNIT II THEORY OF PRODUCTION AND COST ANALYSIS Production Function:- The production function expresses a functional relationship between physical inputs and physical outputs of a firm at any particular
More informationB. Com (Hons.) III Semester Paper Title: Cost Accounting Paper Code: AS-2620
B. Com (Hons.) III Semester Paper Title: Cost Accounting Paper Code: AS-26 * Prepared by: Nilmani Tripathi, Assistant Professor, Department of Commerce, GGV Answer 1. Short answer question 1. Eight example
More informationFull file at
Chapter 02 Cost Concepts and Behavior True / False Questions 1. The cost of an item is the sacrifice made to acquire it. True False 2. An expense is an expired cost matched with revenues in a specific
More informationQuestion Paper Accounting For Decision Making - II (MB2D2): January 2009
Question Paper Accounting For Decision Making - II (MB2D2): January 2009 1. Prime cost plus variable overheads is Answer all 70 questions. Marks are indicated against each question. Total Marks : 100 Total
More informationIntroduction to Management Accounting
Smeal College of Business Managerial Accounting: ACCTG 404 Pennsylvania State University Professor Huddart 1. What is Management Accounting? Purpose is to provide information to allow users to make better
More informationUNIT 8 COST CONCEPTS AND ANALYSIS I
UNIT 8 COST CONCEPTS AND ANALYSIS I Objectives After going through this unit, you should be able to: understand some of the cost concepts that are frequently used in the managerial decision making process;
More informationFull file at
Chapter 2 Cost Concepts and Behavior rue/false Questions F 1. he cost of an item is the sacrifice made to acquire it. Answer: rue Difficulty: Simple Learning Objective: 1 F 2. A cost can either be an asset
More informationFull file at Chapter 02 - Basic Cost Management Concepts
CHAPTER 2 BASIC COST MANAGEMENT CONCEPTS Learning Objectives 1. Explain what is meant by the word cost. 2. Distinguish among product costs, period costs, and expenses. 3. Describe the role of costs in
More informationCOMPREHENSIVE EXAMINATION A
COMPREHENSIVE EXAMINATION A (Chapters 1-4) Approximate Problem Topic Points Minutes A - I Multiple Choice... 20 20 A - II Cost of Goods Manufactured and Sold... 20 15 A - III Job Order Cost Accounting...
More informationFINANCIAL STATEMENTS
FINANCIAL STATEMENTS Key Topics to Know Cost of good sold statement is prepared from the finished goods inventory account. Cost of goods sold statement has the same format as in financial accounting. Cost
More informationManagement s Accountability to Stakeholders Stakeholders Provide Management is accountable for: Owners Operating activities Government Creditors
Chapter 15 Distinguish management accounting from financial accounting Management Management s Accountability to Stakeholders Stakeholders Owners Government Provide Management is accountable for: Operating
More informationCost Accounting. Multiple Choice Questions:
Multiple Choice Questions: 1- The Value Chain a- Involves external companies as well as internal activities. b- Is the sequence of business functions in which customer usefulness is added to products or
More informationFixed Variable Marginal Average
Engineering Costs Classifications of costs Fixed - constant, unchanging Rent is constant Typically includes building leases, insurance, salaries and lighting costs. Variable - depends on activity level
More informationInventories. Raw material 61,000 81,000 Work in process 80,000 30,000 Finished goods 90, ,000
Beginning Inventories Ending Raw material 61,000 81,000 Work in process 80,000 30,000 Finished goods 90,000 110,000 Direct material used 318,000 Direct Labour 230,000 Manufecturing Overhead-60% of Direct
More informationMANAGEMENT ACCOUNTING - Cost Classification & Behaviour
MANAGEMENT ACCOUNTING - Cost Classification & Behaviour 1 Prepared by: Yaeesh Yasseen, Jade Jansen, Rashied Small & Lucinda Smidt Reviewed by: Achmad Joseph 2 Managerial Accounting - Introduction 3 Cost
More information1. The cost of an item is the sacrifice of resources made to acquire it. 2. An expense is a cost charged against revenue in an accounting period.
Chapter 02 Cost Concepts and Behavior True / False Questions 1. The cost of an item is the sacrifice of resources made to acquire it. True False 2. An expense is a cost charged against revenue in an accounting
More informationChapter 4 Activity-based Costing Systems
Chapter 4 Activity-based Costing Systems ABC costing may use five different cost categories that reflect different levels of production activities and that sum to total production costs. Unit-level cost:
More informationCOST C O S T COST. Cost is not a simple concept. It is important to distinguish between four different types - fixed,, variable, average and marginal.
Ir. Haery Sihombing/IP Pensyarah Fakulti Kejuruteraan Pembuatan Universiti Teknologi Malaysia Melaka Chapter 3 DIRECT COST Chapter 4 INDIRECT COSTS C O S T COST Cost is not a simple concept. It is important
More informationBasic Cost Management Concepts. M. En C. Eduardo Bustos as
Basic Cost Management Concepts M. En C. Eduardo Bustos Farías as 1 Objectives 1. Explain what is meant by the word "cost." 2. Distinguish among product costs, period costs,, and expenses. 3. Describe the
More information1 Cost Accounting - Basic Concepts & Treatment of Special Items
1 Cost Accounting - Basic Concepts & Treatment of Special Items This Chapter Includes: Cost Accounting : Necessity & Importance; Cost Department, Costing System, Design of Forms & Records, Treatment of:
More informationSECTION I. Sh ,000 10,200 16,680 14,000 2,600 4,200 13,300 2,520 1,600 10,500 12, ,000
QUESTION ONE SECTION I Wangu Manufacturing Company Ltd. is located at the industrial area in Nairobi. The company uses four different machine groups, A, B, C and D in its manufacturing process. The overhead
More informationOBJECTIVES After studying this lesson, you will be able to: state the meaning of cost; explain the elements of cost; state the meaning of overheads;
28 BASIC COST CONCEPTS In the previous lesson you have learnt about cost accounting. If you decide to manufacture say electronic digital meter, you will need raw material, labour and incur other incidental
More informationCost Behavior. Material Cost: Direct material: 1. seen in the final product 2. economic/visible to trace Indirect Material:
1 Chapter 2 Introduction to Cost Terms and Purposes Cost A cost is the value of economic resources (e.g., money) sacrificed or used up to achieve a particular objective (e.g., produce a product or perform
More informationCOST OF GOODS MANUFACTURES B.COM. PART II
COST OF GOODS MANUFACTURES B.COM. PART II Q#1 Following are the balances appear on the Trial Balance of SAMREEN & Co. for the year ended April 30, 1980. Inventory of Goods in Process April, 01 Rs.109,000
More information9.15 BOOKS RECOMMENDED
241 5. What are the advantages of Cost Accounting? 6. What are the essentials of good costing system? 7. What are the various elements of costs? 8. Write short notes on: a) Cost centres b) Cost units c)
More information1). Fixed cost per unit decreases when:
1). Fixed cost per unit decreases when: a. Production volume increases. b. Production volume decreases. c. Variable cost per unit decreases. d. Variable cost per unit increases. 2). Prime cost + Factory
More informationChapter Review Solutions
Chapter 2: Manufacturing & Trading Statements Chapter Review Solutions 1. ( a ) Direct Material Cost Inventory 1/7/09 5,000 Purchases 25,000 30,000 Less Inventory 30/6/10 4,000 26,000 ( b ) Direct Material
More informationCOST CONCEPTS IN DECISION MAKING
CHAPTER 2 COST CONCEPTS IN DECISION MAKING BASIC CONCEPTS & FORMULAE Basic Concepts 1. Relevant cost in decision making process: Costs which are relevant for a particular business option, which are not
More informationTest Bank For Cost Accounting A Managerial Emphasis Fifth Canadian 5th Edition By Horngren Foster Datar And Gowing
Test Bank For Cost Accounting A Managerial Emphasis Fifth Canadian 5th Edition By Horngren Foster Datar And Gowing Link full download: https://digitalcontentmarket.org/download/test-bank-for-cost-accounting-amanagerial-emphasis-fifth-canadian-5th-edition-by-horngren-foster-datar-andgowing/
More informationAn Introduction to Cost Terms and Purposes
CHAPTER 2 An Introduction to Cost Terms and Purposes Overview This chapter introduces the basic terminology of cost accounting. Communication among managers and management accountants is greatly facilitated
More informationThe following are all product costs except: a. Direct materials b. Factory overhead c. Direct labor d. Sales and administrative expenses
1 MULTIPLE CHOICE 1-2 I certify that I am taking this assessment alone and that I am receiving no help with it except through the use of my textbook and notes. I have not been given the questions in advance.
More informationManagerial Accounting and Cost Concepts
Managerial Accounting and Cost Concepts Chapter 2 PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright
More information1 INTRODUCTION DEFINITIONS VALUATION INVENTORY ALLOWANCE (NET REALIZABLE VALUE) REPORTING INTERNAL INVENTORY...
RAPALA INVENTORY VALUATION PRINCIPLES AND INTERNAL INVENTORY 1 INTRODUCTION... 2 2 DEFINITIONS... 2 2.1 INVENTORIES... 2 2.2 STOCK COVERAGE... 3 2.3 OBSOLETE INVENTORY... 3 2.4 NET REALIZABLE VALUE...
More information- 1 - Direct Material (Rs.) Material Cost Per Unit Units Produced
- 1 - COST BEHAVIOR THE NATURE OF COSTS: Before one can begin to understand how a business is going to perform over time and with shifts in volume, it is imperative to first consider the cost structure
More informationLOYOLA COLLEGE (AUTONOMOUS), CHENNAI
LOYOLA COLLEGE (AUTONOMOUS), CHENNAI 600 034 B.Com. DEGREE EXAMINATION CORPORATE SECRETARYSHIP FOURTH SEMESTER APRIL 2016 BC 4504/BC 5501 COST ACCOUNTING Date: 22-04-2016 Dept. No. Max. : 100 Marks Time:
More informationLecture 2: Flow of resource costs
Lecture 2: Flow of resource costs Cost Object: anything for which a separate measurement of costs is required, e.g. products, services, customers, projects, processes, segments of the value chain, divisions/departments,
More informationCost Accounting: A Managerial Emphasis, 16e, Global Edition (Horngren) Chapter 2 An Introduction to Cost Terms and Purposes
Cost Accounting: A Managerial Emphasis, 16e, Global Edition (Horngren) Chapter 2 An Introduction to Cost Terms and Purposes 2.1 Objective 2.1 1) Which of the following would be considered an actual cost
More informationAn Introduction to Cost Terms and Purposes. Dr. Osama Al Meanazel
An Introduction to Cost Terms and Purposes Dr. Osama Al Meanazel Lecture 5 Other Cost Concepts Cost driver a variable that causally affects costs over a given time span Relevant range the band of normal
More informationActivity-Based Costing
Activity-Based Costing Total Class Costing Designing ABC System Traditional System vs. Activity-Based Cost System Traditional System Activity-Based Cost System Activity-Based Costing Shifts Analysis from
More informationWHAT IS DEMAND? CHAPTER 4.1
Economics Unit 2 TEACHER WHAT IS DEMAND? CHAPTER 4.1 What is demand? THE DESIRE, ABILITY, AND WILLINGNESS TO BUY A PRODUCT. What is microeconomics? THE AREA OF ECONOMICS THAT DEALS WITH BEHAVIOR AND DECISION
More informationWhich of the following is correct? Select correct option: Units sold=opening finished goods units + Units produced Closing finished goods units Units
Which of the following is correct? Units sold=opening finished goods units + Units produced Closing finished goods units Units Sold = Units produced + Closing finished goods units - Opening finished goods
More informationTopic 2: Accounting Information for Decision Making and Control
Learning Objectives BUS 211 Fall 2014 Topic 1: Introduction Not applicable Topic 2: Accounting Information for Decision Making and Control State and describe each of the 4 items in the planning and control
More informationChapter 2 An Introduction to Cost Terms and Purposes
Chapter 2 An Introduction to Cost Terms and Purposes Copyright 2003 Pearson Education Canada Inc. Slide 2-15 Costs and Cost Objects Cost a resource sacrificed or foregone to achieve a specific objective
More informationChapter 1 Info Systems and Relevant info in Management Decision Making
Chapter 1 Info Systems and Relevant info in Management Decision Making Cost accounting: involves the process of tracking, recording, analyzing and determining the cost of an organization s project, process
More informationChapter 2--Cost Terminology and Cost Behaviors
Chapter 2--Cost Terminology and Cost Behaviors Student: 1. A cost object is anything for which management wants to collect or accumulate costs. 2. A production plant could be a cost object. 3. A specific
More informationRelevant Costs for Decision Making
11-1 Management Accounting Lecture 17 (Chapter 11) Relevant Costs for Decision Making Today s Agenda Relevant Costs vs. Irrelevant Costs Differential Approach vs. Total Cost Approach Product Transfer Decision
More informationChapter 02 - Cost Concepts and Cost Allocation
Chapter 02 - Cost Concepts and Cost Allocation Student: 1. Product costs for a manufacturing company consist of direct materials, direct labor, and overhead. 2. Period cost and product cost are synonymous
More informationChapter 02 - Cost Concepts and Cost Allocation
Chapter 02 - Cost Concepts and Cost Allocation Student: 1. Product costs for a manufacturing company consist of direct materials, direct labor, and overhead. 2. Period cost and product cost are synonymous
More informationPart 3 : 11/11/10 07:42:55. MultiFrame Company has the following revenue and cost budgets for the two products it sells.
Question 1 - CMA 1290 4-4 - Decision Making MultiFrame Company has the following revenue and cost budgets for the two products it sells. Plastic Frames Glass Frames Budgeted unit sales 100,000 300,000
More informationDECISION MAKING. Key Topics to Know
DECISION MAKING Key Topics to Know Relevance refers to whether a revenue or cost will change as the result of the decision made. Relevant revenues or costs always change as the result of the decision.
More informationMANAGEMENT ACCOUNTING 2 MODULE CODE: ACCT08004
School of Business & Enterprise Paisley & Hamilton Campus Session 014-015 Trimester 1 MANAGEMENT ACCOUNTING MODULE CODE: ACCT08004 Date: 16 th January 015 Time: 1000-100 Answer THREE questions Question
More informationDECISION MAKING. Key Terms and Concepts to Know
DECISION MAKING Key Terms and Concepts to Know Relevance: Relevant costs and benefits are those that differ among alternatives Total approach vs. differential approach and why relevant costs must be isolated.
More informationMANAGERIAL ACCOUNTING SPRING 2014 MIDTERM EXAM. PROBLEM 1 Kennedy Company reports the following costs and expenses in May.
PROBLEM 1 Kennedy Company reports the following costs and expenses in May. Factory utilities $ 13,500 Direct labor $79,100 Depreciation on factory Sales salaries 48,400 equipment 12,650 Property taxes
More informationChapter 2--Cost Terminology and Cost Behaviors
Cost Accounting Foundations and Evolutions 9th Edition Kinney Test Bank Full Download: http://testbanklive.com/download/cost-accounting-foundations-and-evolutions-9th-edition-kinney-test-bank/ Chapter
More informationSUPPLY. definition: Supply means the quantity offered for sale by sellers at particular prices, during a certain period of time.
SUPPLY definition: Supply means the quantity offered for sale by sellers at particular prices, during a certain period of time. First factor affecting price is demand. Second factor affecting price is
More informationBusiness Math Boot Camp. Revenue, Cost, and Profit
Zoologic Learning Solutions Business Math Boot Camp Revenue, Cost, and Profit Copyright SS&C Technologies, Inc. All rights reserved. Course: Business Math Boot Camp Lesson 10: Revenue, Cost, and Profit
More informationACCTG 533, Section 1: Lecture: Profitability Analysis 1. [Slide Content]: Profitability Analysis 1. [Jeanne H. Yamamura]: Profitability Analysis 1.
ACCTG 533, Section 1: Lecture: Profitability Analysis 1 Profitability Analysis 1 Profitability Analysis 1. Profitability analysis, also known as differential analysis and relevant cost analysis, builds
More informationAn accounting perspective: Business insight
An accounting perspective: Business insight Engineers for automobile companies in the United States believe that Japanese manufacturers can build cars for considerably less than their US counterparts.
More informationChapter 2--Cost Terminology and Cost Behaviors
Test Bank For Cost Accounting Foundations and Evolutions 9th Edition by Kinney and Raiborn Link full download: http://testbankcollection.com/download/test-bank-for-cost-accounting-foundationsand-evolutions-9th-edition-by-kinney/
More informationCOST COST OBJECT. Cost centre. Profit centre. Investment centre
COST The amount of money or property paid for a good or service. Cost is an expense for both personal and business assets. If a cost is for a business expense, it may be tax deductible. A cost may be paid
More informationIntroduction to Finance. 31 May Marking Scheme
Introduction to Finance 31 May 2016 Marking Scheme This marking scheme has been prepared as a guide only to markers. This is not a set of model answers, or the exclusive answers to the questions, and there
More informationPart 1 Study Unit 6. Cost Allocation Techniques Jim Clemons, CMA
Part 1 Study Unit 6 Cost Allocation Techniques Jim Clemons, CMA Absorption versus Variable Costing You need to be able to answer the following: Under absorption costing, which cost are considered product
More informationMona Loa Malaysian Manufacturing cost per bag... $6.00 $5.00 Add markup at 30% Selling price per bag... $7.80 $6.50
Case 8-24 1. a. The predetermined overhead rate would be computed as follows: Expected manufacturing overhead cost $3,000,000 = Estimated direct labour-hours 50,000 DLHs =$60 per DLH b. The unit product
More informationAGENDA: DIFFERENTIAL ANALYSIS: THE KEY TO DECISION MAKING
TM 12-1 AGENDA: DIFFERENTIAL ANALYSIS: THE KEY TO DECISION MAKING A. Identification of relevant costs and benefits. B. Drop or retain a segment. C. Make or buy decision. D. Utilization of constrained resources.
More informationa) Describe the main factors in classifying costs as either relevant or irrelevant for management decision-making purposes.
Chapter 5 Solutions Solution 5.1 a) Describe the main factors in classifying costs as either relevant or irrelevant for management decision-making purposes. The function of decision-making is to select
More informationCA FINAL - AMA (COSTING) THEORY NOTES
CA FINAL - AMA (COSTING) THEORY NOTES [APPLICABLE FOR MAY 2016 & ONWARDS] BY CA AMOGH Amogh Ashtaputre @amoghashtaputre Amogh Ashtaputre Amogh Ashtaputre FINAL C.A. COSTING THEORY NOTES INDEX Chapter No.
More informationPaper T4. Accounting for Costs. Thursday 10 December Certified Accounting Technician Examination Intermediate Level
Certified Accounting Technician Examination Intermediate Level Accounting for Costs Thursday 10 December 2009 Time allowed: 2 hours This paper is divided into two sections: Section A ALL 20 questions are
More informationCHAPTER 8. Valuation of Inventories: A Cost-Basis Approach 1, 2, 3, 4, 5, 6, 7, 8, 11, 12, 14, 15, 16
CHAPTER 8 Valuation of Inventories: A Cost-Basis Approach ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Inventory accounts; determining
More informationDecision-making process
Lecture 1 MGT 705 - Advanced Cost and Management Accounting Introduction to Management Accounting Definition : process of identifying, measuring and communicating economic information to permit informed
More informationCHAPTER Activity Cost Behavior
3-1 CHAPTER Activity Cost Behavior Objectives 3-2 1. Define cost behavior After studying for fixed, this variable, and mixed costs. chapter, you should 2. Explain the role be of the able resource to: usage
More information