cost12eppt_02

CHAPTER 2

An Introduction to

Cost Terms and Purposes

To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved. 2-2

Basic Cost Terminology

Cost – sacrificed resource to achieve a specific objective 耗用資源成就特定標地

Actual Cost – a cost that has occurred Budgeted Cost – a predicted cost Cost Object – anything of interest for which a

cost is desired 成本標的 : 有關係的任何事務因此成本是一種獲取


Basic Cost Terminology

Cost Accumulation – a collection of cost data in an organized manner 方法

Cost Assignment 分配 – a general term that includes gathering accumulated costs to a cost object. This includes: Tracing accumulated costs with a direct

relationship to the cost object and Allocating 分攤 accumulated costs with an

indirect relationship to a cost object


Direct and Indirect Costs

Direct Costs – can be conveniently and economically traced 追朔 (tracked 軌跡 ) to a cost object 標地

Indirect Costs – cannot be conveniently or economically traced (tracked) to a cost object. Instead of being traced, these costs are allocated to a cost object in a rational 合理

and systematic 有系統的 manner


Cost Examples

Direct Costs Parts Assembly line wages

Indirect Costs Electricity Rent Property taxes


Factors Affecting Direct/Indirect Cost Classification

Cost Materiality: important part Availability of Information-gathering

Technology- easy to collect Information Operational Design :depend on product


Cost Behavior

Variable Costs – changes in total in proportion to changes in the related level of activity or volume 依相關作業或數量變動而成正比例變動的成本。

Fixed Costs – remain unchanged in total regardless of 不管

changes in the related level of activity or volume 不隨數量變動而變動的成本。

semivariable Cost （半变动成本） – Cost remain Unchanged under specific valume or activity. But when valume or

activity is over certain level the cost will be changed. 通常有一个固定不变的基数，相当于固定成本；但是，在这个基数之上发生的成本部分则是随业

务量的变动而成比例变动，这部分成本相当于变动成本。


Cost Behavior, continued

Variable costs – are constant on a per-unit basis 單位成本

不變 . If a product takes 5 pounds of materials each, it stays the same per unit regardless of whether one, ten, or a thousand units are produced

Fixed costs – change inversely with the level of production. As more units are produced, the same fixed cost is spread over more and more units, reducing the cost per unit 單位成本越來越低

Costs are fixed or variable only with respect to a specific activity or a given time period


Cost Behavior Summarized

Total Dollars Cost per Unit

Variable Costs

More output = More cost

Unchanged in relation to output

Fixed Costs Unchanged in relation to output

Change inversely with output

More output = lower cost

per unit

Total Dollars Cost per Unit

Variable Costs

Change in proportion 比例 with outputMore output = More cost


Fixed Costs


Change inversely with outputMore output = lower cost per unit

1010To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright © 2006 by Pearson Education. All rights reserved.

Minnesota Office ProductsMinnesota Office Products (in millions)(in millions)

(after cost analysis by consultant)(after cost analysis by consultant) SupremeSupreme DeluxeDeluxe RegularRegular

Direct material costsDirect material costs $84$84 $54$54 $62$62

Direct manufacturing labor costsDirect manufacturing labor costs 14.014.0 28.028.0 8.08.0

Direct energy costsDirect energy costs 39.839.8 40.740.7 9.59.5

Other manufacturing overhead Other manufacturing overhead costscosts 16.816.8 33.633.6 9.69.6

Total manufacturing costsTotal manufacturing costs $154.6$154.6 $156.3$156.3 $89.1$89.1

Units produced (from 2-16)Units produced (from 2-16) 8080 120120 100100

Cost per unitCost per unit $1.93$1.93 $1.30$1.30 $0.89$0.89


Other Cost Concepts

Cost Driver – a variable 變動性 that causally 因果關係

的 affects costs over a given time span 间隔 Relevant Range – the band of normal activity

level (or volume) in which there is a specific relationship between the level of activity (or volume) and a given cost For example, fixed costs are fixed only within

the relevant range.


A Cost Caveat 警告

Unit costs should be used cautiously 謹慎地 . Since unit costs change with a different level of output 產出 or volume 數量 , it may be more prudent 謹慎的 to base decisions 建立決策 on a total dollar basis. 總成本的基礎上


Different Types of Firms

Manufacturing-sector companies – create and sell their own products 生產公司 : 生產銷售產品

Merchandising-sector companies – product resellers 買賣公司 : 產品銷售

Service-sector companies


Types of Inventories

Direct Materials – resources instock and available for use 直接材料

Work-in-Process (or progress) – products started but not yet completed. Often abbreviated as WIP 在製品 : 在產品

Finished Goods – products completed and ready for sale 產成品 : 製成品


Types of Product Costs

Direct Materials Direct Labor Indirect Manufacturing 間接生產成本 –

factory costs that are not traceable to the product. Also known as Manufacturing Overhead 生產費用 costs or Factory Overhead 製造費用開支 costs


Distinctions Between Costs

Inventoriable Costs 存貨成本 – product manufacturing costs. These costs are capitalized as assets (inventory) until they are sold and transferred to Cost of Goods Sold

Period Costs – have no future value and are expensed as incurred.expenses


Cost Flows

The Cost of Goods Manufactured and the Cost of Goods Sold section of the income statement are accounting representations of the actual flow of costs through a production system. Note the importance of inventory accounts in

the following accounting reports, and in the cost flow chart


Cost of Goods Manufactured

Direct Materials: Beginning Inventory, January 1 11,000$ Add: Purchases 73,000 Cost of Direct Materials Available for Use 84,000 Less: Ending Inventory, December 31 8,000 Direct Materials Used 76,000Direct Labor 9,000Manufacturing Overhead: Indirect Labor 7,000 Supplies 2,000 Heat, Light & Power 5,000 Depreciation - plant building 2,000 Depreciation - plant equipment 3,000 Miscellaneous 1,000 Total Manufacturing Overhead Costs 20,000Manufacturing costs incurred during 2007 105,000Add: Beginning WIP, January 1 6,000Total Manufacturing Costs to account for 111,000Less: Ending WIP, December 31 7,000Cost of Goods Manufactured 104,000$

Cellular ProductsSchedule of Cost of Goods Manufactured

For the Year Ended December 31, 2007 (in thousands)

Calculates the cost of Direct Materials Used

Accumulates the three product costs for the current period

Adjusts the current period manufacturing costs to account for units actually completed


Income Statement

Revenues $210,000Cost of Goods Sold Beginning Finished Goods, January 1 22,000 Cost of Goods Manufactured 104,000 Cost of Goods Available for sale 126,000 Ending Finished Goods, December 31 18,000 Cost of Goods Sold 108,000Gross Profit 102,000Operating Costs: Marketing, distribution, and customer-service 70,000 Total operating costs 70,000Operating Income $32,000

Cellular ProductsIncome Statement

For the Year Ended December 31, 2007 (in thousands) Figure carries forward from the Schedule of Cost of Goods Manufactured

Period Costs are expensed as incurred

20

Direct Materials:

Beginning Inventory, January1$ 11,000

Add: Purchases73,00

0

Cost of Direct Materials Available for Use

84,000

Less: Ending Inventory, December 31 8,000

Direct Materials Used

76,000

Direct Materials

Beginning Inventory 11,000

Purchases 73,000

76,000 Used

Ending Inventory December 31 8,000


Direct Labor

input 9,000 9,000

used


Manufacturing Overhead: Indirect Labor 7,000 Supplies 2,000 Heat, Light & Power 5,000 Depreciation - plant building 2,000 Depreciation - plant equipment 3,000 Miscellaneous 1,000 Total Manufacturing Overhead Costs20,000

Manufacturing Overhead Costs

7,0002,0005,0002,0003,0001,000

7,0002,000

5,000 used2,0003,0001,000


Work in process

Add:Beginning WIP, January1 600076,000( Direct Materials USED)

9,000( Direct Labor )

7,0002,0005,0002,0003,0001,000

Less: Ending WIP, December 31 7000

Cost of Goods Manufactured:

104,000


• Beginning Finished Goods, January1 22,000 Cost of Goods Manufactured 104,000

• Cost of Goods Available for sale = 126,000 Less: Ending Finished Goods, December 31—18,000

• Cost of Goods Sold = 108,000


Revenues $210,000Cost of Goods Sold Beginning Finished Goods, January 1 22,000 Cost of Goods Manufactured 104,000 Cost of Goods Available for sale 126,000 Ending Finished Goods, December 31 18,000 Cost of Goods Sold 108,000Gross Profit 102,000Operating Costs: Marketing, distribution, and customer-service 70,000 Total operating costs 70,000Operating Income $32,000

Cellular ProductsIncome Statement

For the Year Ended December 31, 2007 (in thousands)


Cost FlowchartBalanceSheet

IncomeStatement

InventoriableCosts

DirectMaterials

Purchases

Other DirectManufacturing

Costs

ManufacturingOverhead

Costs

DirectMaterialsInventory

Work-in-ProcessInventory

Revenues

Cost ofGoodsSold

R&D CostsDesign Costs

Marketing CostsDistribution CostsCustomer-Service

Costs

PeriodCosts

FinishedGoods

Inventory

Equals OperatingIncome

Stored

Incurred

Applied

Completed


Other Cost Considerations

Prime cost 主要成本 is a term referring to all direct manufacturing costs (labor 直接人工 and materials直接材料 )

Conversion cost 加工成本 is a term referring to direct labor and factory overhead costs, collectively (direct labor 直接人工 + factory overhead costs 間接生產成本 )

Overtime labor costs are considered part of overhead 間接生產成本或製造費用


Different Definitions of Cost for Different Applications p43p 44

Pricing and product-mix decisions – may use a “super” cost approach (comprehensive)p43p 44

Contracting with government agencies – very specific definitions of cost for “cost plus profit” contracts

Preparing external-use financial statements – GAAP-driven product costs only p44 down


Three Common Features of Cost Accounting and Cost Management Calculating the cost of products, services,

and other cost objects Obtaining 獲得 information for planning and

control, and performance evaluation Analyzing the relevant information for making

decisions


PROBLEM 2-28

Consider the following account balances (in thousands) for the Canseco Company:

Beginning of End of 2001 2001 Direct materials inventory $22,000 $26,000 Work in process inventory 21,000 20,000 Finished goods inventory 18,000 23,000 Purchases of direct materials 75,000 Direct manufacturing labor 25,000 Indirect manufacturing labor 15,000 Plant insurance 9,000 Depreciation C plant building and equipment 11,000 Repairs and maintenance C plant 4,000 Marketing, distribution, and customer-service costs 93,000 General and administrative costs 29,000 Required: 1. Prepare a schedule of cost of goods manufactured for 2001. 2. Revenues in 2001 were $300 million. Prepare the 2001 income

statement.

3131

Canseco Company

Schedule of Cost of Goods Manufactured

Year Ended December 31, 2007(in thousands)

Direct materials:

Beginning Inventory, January 1, 2007 $22,000

Purchases of direct materials+ 75,000

Cost of direct materials available for use= 97,000

Ending Inventory, December 31, 2007- 26,000

Direct materials used= $71,000

Direct maufacturing labor + 25,000

Indirect manufacturing costs:

Indirect manufacturing labor+ 15,000

+

Plant insurance+ 9,000

+

Depreciation -- plant building & equipment+ 11,000

+

Repairs and Maintenance -- plant+ 4,000

+

Total Indirect manufacturing costs = + 39,000

Manufacturing costs incurred during 2007 =135,000+

Add beginning work-in-progress inventory, January 1, 2007 +21,000

Total manufacturing costs to acccount for =156,000

Deduct ending work-in-progress inventory, December 31, 2007- - 20,000

Cost of goods manufactured (to Income Statement)= =$136,000


Income StatementYear Ended December 31, 2007

(in thousands)Revenues $300,000

Cost of Goods Sold:

Beginning finished goods, January 1, 2007 $18,000

Cost of goods manufactured 136,000

Cost of goods available for sale 154,000

Ending finished goods, December 31, 2007 23,000

Cost of goods sold 131,000

Gross margin 169,000

Operating costs:

Marketing, distribution, and customer-service costs 93,000

General and administrative costs 29,000

Total operating costs 122,000

Operating Income $47,000


• Home work p49(2-19)• P45 problem

cost12eppt_02

Documents

cost accounting

predicted cost cost

cost proportion

volume semivariable

cost terms

budgeted cost

cost fixed fixed costs

cost object indirect