ACCT102 Wk1a CostConcepts - ACCT102 Management Accounting...

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ACCT102 Management Accounting Aug 2013 1 Week 1 Cost Concepts Cost and Cost Classifications
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Costs in an organization 2 OBJECTIVES Where do we want to go? Physical Resources $$$ Human Resources $$$ Support services Accounting Human resources Legal services Information systems Telecommunications R & D Design Supply Product-ion Marketing Distribut- ion Customer service Value of products and services Value Chain S T R A T E G Y H o w d o w e w a n t t o g e t t h e r e ?
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Product Costs for Financial Reporting & Decision-Making E.g. How would you calculate the cost of the product? Aug 2013 3 Focus of Product Costing (applies FA concepts)
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Company producing Multiple Products Aug 2013 4
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Cost Concepts Aug 2013 5 All Costs Incurred Manufacturing Costs Non-Manufacturing Costs Direct Indirect Supporting Others Product A Product B Financial Statements Function of Cost? Traceable to Cost Object? Cost Object Allocate Trace
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Manufacturing or Non-Manufacturing Cost? 6 Is Cost required for manufacturing ? Manufacturing Cost (Product Cost or Inventoriable Cost) Examples Lubricant for production machinery Packing materials of raw materials Salary of production workers Depreciation of factory Non-Manufacturing Cost (Period Cost or Expense) Examples Lubricant for office equipment Packing materials for delivery to customers Salary of salesmen Depreciation of shop YES; result in a Product -> Asset NO; cannot be captured in an asset -> Expense Aug 2013
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Manufacturing Costs 7 Direct materials 1 sqm @ $10/sqm Direct labour 0.5 hour @ $50/hr Indirect manufacturing costs (aka Manufacturing Overhead) $10,000 per month for whole factory Aug 2013
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Direct Cost $ Cost Object Can the cost be conveniently traced to the cost object? How significant ($) is the cost? Examples: Cost of fabric ( direct material ); Cost of production worker ( direct labour ) Manufacturing Costs: Direct Costs of 8 Aug 2013
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Manu Overheads are Common Costs $ e.g. factory rental; depreciation of sewing machines Cost Object Manufacturing Costs: Indirect Costs 9 S H A R E D c o s t ; N o t t r a c e a b l e Aug 2013
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Manufacturing Costs 10 Manufacturing Costs Direct Materials Direct Labour Manu Overhead/Indirect Manufacturing Cost Indirect materials Indirect labour Other indirect costs needed for manufacturing e.g. depreciation of prodn eqpt; utilities of factory; insurance on production facilities Aug 2013
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Homework: Garrison 2-23 Direct & Indirect cost 11 Madison Seniors Care Centre Program A Progam B: Meals on Wheel Other Programs Other Programs August 2012
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Homework: Garrison 2-23 Direct & Indirect cost 12 Program A Meals on Wheel Program Other Programs Other Programs Direct or Indirect: always with respect to the cost object .
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