Manufacturing cost accounting ppt @ mba finance
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  • 1. Manufacturing Cost Accounting
  • 2. OutlineCost Terms, Concepts, andClassificationsJob Order CostingCost BehaviorCost – Volume – ProfitActivity Based CostingProfit PlanningStandard CostsFlexible Budgets and Overhead
  • 3. Product Costs - A Closer Look Manufacturing Work Raw Materials Costs In Process Beginning raw Direct materials Beginning work in materials inventory + Direct labor process inventory+ Raw materials + Mfg. overhead + Total manufacturing purchased = Total manufacturing costs= Raw materials costs = Total work in available for use process for the in production periodCosts associated with the goods that – Ending work inare completed during the period are process inventory transferred to finished goods = Cost of goods inventory. manufactured.
  • 4. The Contribution Format Total UnitSales Revenue $ 100,000 $ 50Less: Variable costs 60,000 30Contribution margin $ 40,000 $ 20Less: Fixed costs 30,000Net income $ 10,000 The contribution margin format emphasizes cost behavior. Contribution margin covers fixed costs and provides for income.
  • 5. Calculating Breakeven in UnitsHere is the information from WindBicycle Co.: Total Per Unit Percent Sales (500 bikes) $250,000 $ 500 100% Less: variable expenses 150,000 300 60% Contribution margin $100,000 $ 200 40% Less: fixed expenses 80,000 Net income $ 20,000
  • 6. The Master Budget Sales Budget Ending Selling and ProductionInventory Administrative Budget Budget Budget Direct Direct ManufacturingMaterials Labor Overhead Budget Budget Budget Cash Budget Budgeted Financial Statements
  • 7. The Direct Materials Budget April May June QuarterProduction 26,000 46,000 29,000 101,000Materials per unit 5 5 5 5Production needs 130,000 230,000 145,000 505,000Add desired ending inventory 23,000 14,500 11,500 11,500Total needed 153,000 244,500 156,500 516,500Less beginning inventory 13,000 23,000 14,500 13,000Materials to be purchased 140,000 221,500 142,000 503,500
  • 8. Labor Variances Summary Actual Hours Actual Hours Standard Hours × × × Actual Rate Standard Rate Standard Rate 1,550 hours 1,550 hours 1,500 hours × × ×$6.20 per hour $6.00 per hour $6.00 per hour = $9,610 = $9,300 = $9,000 Rate variance Efficiency variance $310 unfavorable $300 unfavorable
  • 9. Flexible Budget Performance Report CheeseCo Cost Total Formula Fixed Flexible Actual Per Hour Costs Budget Results VariancesMachine hours 8,000 8,000 0Variable costs Indirect labor $ 4.00 $ 32,000 $ 34,000 $ 2,000 U Indirect material 3.00 24,000 25,500 1,500 U Power 0.50 4,000 3,800 200 FTotal variable costs $ 7.50 $ 60,000 $ 63,300 $ 3,300 UFixed Expenses Depreciation $ 12,000 $ 12,000 $ 12,000 0 Insurance 2,000 2,000 2,050 50 UTotal fixed costs $ 14,000 $ 14,050 50 UTotal overhead costs $ 74,000 $ 77,350 $ 3,350 U
  • 10. Utilization of a Constrained ResourceLet’s calculate the contribution marginper unit of the scarce resource,machine A1. If there are no other considerations, the best plan would be to produce to meet current demand for Product 2 and then use remaining capacity to make Product 1.