Presentation on Manufacturing Cost Classifications and Calculations
•Download as PPTX, PDF•
1 like•78 views
A presentation about basic things of cost in accounting
Recommended
More Related Content
What's hot
What's hot (18)
Similar to Presentation on Manufacturing Cost Classifications and Calculations
Similar to Presentation on Manufacturing Cost Classifications and Calculations (20)
More from Md. Hasnat Shoheb
More from Md. Hasnat Shoheb (10)
Recently uploaded
Recently uploaded (20)
Presentation on Manufacturing Cost Classifications and Calculations
- 3. “COST” 33
- 5. 5
- 6. Manufacturing cost ▰Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. 6
- 7. 7
- 8. 2-7 Direct Materials Raw materials that become an integral part of the product and that can be conveniently traced directly to it. Example: A radio installed in an automobile
- 9. 2-8 Direct Labor Those labor costs that can be easily traced to individual units of product. Example: Wages paid to automobile assembly workers
- 10. 2-9 Manufacturing Overhead Manufacturing costs that cannot be easily traced directly to specific units produced. Examples: Indirect materials and indirect labor
- 11. 2-10 Nonmanufacturing Costs Administrative Costs All executive, organizational, and clerical costs. Administrative costs can be either direct or indirect costs.
- 12. 2-12 Product Costs Versus Period Costs Product costs include direct materials, direct labor, and manufacturing overhead. Inventory Cost of Good Sold Balance Sheet Income Statement Sale Period costs include all selling costs and administrative costs. Expense Income Statement
- 13. SHAHAB UDDIN 152-15-483 FEATURE MAN COST CLASSIFICATIONS FOR PREDICTING COST BEHAVIOR
- 14. 2-17 Cost Classifications for Predicting Cost Behavior Cost behavior refers to how a cost will react to changes in the level of activity. The most common classifications are: ▫ Variablecosts. ▫ Fixedcosts. ▫ Mixedcosts.
- 15. 2-18 Variable Cost A cost that varies, in total, in direct proportion to changes in the level of activity. Your total texting bill may be based on how many texts you send. Number of Texts Sent TotalTextingBill
- 16. 2-19 Variable Cost Per Unit However, variable cost per unit is constant. The cost per text sent may be constant at 5 cents per text message. Number of Texts Sent CostPerTextSent
- 17. 2-21 Fixed Cost A cost that remains constant, in total, regardless of changes in the level of the activity. Your monthly contract fee for your cell phone may be fixed for the number of monthly minutes in your contract. Number of Minutes Used Within Monthly Plan MonthlyCellPhone ContractFee
- 18. 2-30 Fixed Monthly Utility Charge Variable Cost per KW Activity (Kilowatt Hours) TotalUtilityCost X Y A mixed cost contains both variable and fixed elements. Consider the example of utility cost. Mixed Costs
- 19. MAHADI HASAN 152-15-5797 THE LANGUAGE MAN THE COST OF GOODS MANUFACTURED
- 20. THE COST OF GOODS MANUFACTURED SCHEDULE ▰The cost of goods manufactured schedule is used to calculate the cost of producing products for a period of time. The cost of goods manufactured amount is transferred to the finished goods inventory account during the period and is used in calculating cost of goods sold on the income statement. 20
- 21. 21
- 22. 22
- 23. THE INVENTORY EQUATION 23 Beginning Inventory + Additions to Inventory = Ending Inventory + Items Removed from Inventory The inventory equation allows us to put together the following schedules: Schedule of Total Manufacturing Costs (of the period) Schedule of Cost of Goods Manufactured
- 24. 24 If your inventory balance at the beginning of the month was $1,000, you bought $100 during the month, and sold $300 during the month, what would be the balance at the end of the month? $1,000 + $100 = $1,100 $1,100 - $300 = $800$ 800
- 26. 2-15 Prime Costs and Conversion Costs Manufacturing costs are often classified as follows: Direct Material Direct Labor Manufacturing Overhead Prime Cost Conversion Cost
- 27. Opportunity Cost ▰The potential benefit that is given up when one alternative is selected over another 27
- 28. 28 EXMPLE OF OPPORTUNITY COST You can’t choose both either to study or watch television. If you decide to STUDY, your opportunity cost will be WATCHING TELEVISION. And if you choose WATCHING TELEVISION, your opportunity cost will be STUDYING.
- 29. SUNK COST ▰Sunk costs have already been incurred and cannot be changed now or in the future. These costs should be ignored when making decisions. 29
- 30. EXAMPLE ▰ a company purchased a machine several years ago. Due to change in fashion in several years, the products produced by the machine cannot be sold to customers. Therefore the machine is now useless or obsolete. The price originally paid to purchase the machine cannot be recovered by any action and is therefore a sunk cost. 30
- 32. GROSS MARGIN ▰Gross margin is a company's total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue, expressed as a percentage 32
- 33. CONTRIBUTION MARGIN ▰Contribution margin is a product's price minus all associated variable costs, resulting in the incremental profit earned for each unit sold. 33
- 34. EQUTION ▰Gross Margin Gross margin = sale price – cost of sales (material and labor) ▰Contribution Margin Contribution margin = sales – variable costs 34