UCB UGBA102B 06 2014 Variable & Throughput Costing.ppt - Cost Reporting Variable Throughput Costing UGBA102B Introduction to Managerial Accounting

UCB UGBA102B 06 2014 Variable & Throughput Costing.ppt -...

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Cost Reporting: Variable & Throughput CostingUGBA102B Introduction to Managerial Accounting
UGBA102BDennis Geyer2Absorption CostingProduction CostsProduction Costs represent the cost of resources acquired and used to produce the products or services required by customers. [In a manufacturing company they are the manufacturing costs; in a transportation company they are the transportation costs; in a retail company they are the merchandising costs.]Nonproduction CostsNonproduction Costs represent the cost of support functions such as marketing, legal and administrative costs.
UGBA102BDennis Geyer3Measuring & Reporting CostsAbsorption CostingIndirect Production CostsNonproduction CostsDirect LaborProduction CostsIndirect Operating CostsDirect MaterialsMaterials CostsConversion CostsOperating Costs
UGBA102BDennis Geyer4Measuring & Reporting CostsAbsorption Cost Report%Revenues6,000,000$ 100.0%Less cost of goods sold:Direct materials1,800,000$ Direct labor800,000$ Manufacturing overhead2,200,000$ Cost of goods sold4,800,000$ Gross margin1,200,000$ 20.0%Marketing 500,000$ General administration200,000$ Total nonmanufacturing costs700,000$ Operating income500,000$ 8.3%
UGBA102BDennis Geyer5Variable CostingVariable CostsVariable Costs represent the costs based on resource spending that vary in total with volume of products or services provided to customers.Fixed CostsFixed Costs represent the costs based on resource spending that do not vary in total with volume of products or services provided to customers.
UGBA102BDennis Geyer6Measuring & Reporting CostsVariable CostingFixed CostsIndirect Production CostsIndirect Operating CostsVariable CostsDirect LaborDirect MaterialsDirect MaterialsDirect LaborVariable ProductionFixed Production CostsVariable OperatingFixed Operating Costs
UGBA102BDennis Geyer7Measuring & Reporting CostsVariable Cost Report%Revenues6,000,000$ 100.0%Less variable costs:Direct materials1,800,000$ Direct labor800,000$ Variable production costs1,200,000$ Variable marketing costs200,000$ Total variable costs4,000,000$ Contribution margin2,000,000$ 33.3%Less fixed costsFixed production costs1,000,000$ Fixed marketing costs300,000$ Fixed administrative costs200,000$ Total fixed costs1,500,000$ Operating income500,000$ 8.3%
UGBA102BDennis Geyer8Throughput CostingUnit-Level CostsUnit-Level Costs are the costs of direct resources that are acquired and used to produce the individual products or services.Operating CostsOperating Costs are all other indirect, discretionary, committed, or past spending for resources to support the operations for the period.
UGBA102BDennis Geyer9Measuring & Reporting CostsThroughput CostingUnit-Level CostsIndirect Production CostsIndirect Operating CostsDirect LaborOperating CostsDirect MaterialsUnit-Level CostsConversion CostsProduction Support CostsOperating Support Costs
UGBA102BDennis Geyer10Measuring & Reporting CostsThroughput Cost Report%Revenues6,000,000$ 100.0%Less unit-level costs:Direct materials1,800,000$ Total unit-level costs1,800,000$ Throughput margin4,200,000$ 70.0%Less operating costs:Direct labor800,000$ Other conversion costs1,200,000$ Production support costs1,000,000$ Operating support costs700,000$ Total operating expenses3,700,000$ Operating income500,000$ 8.3%

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