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Ch. 2 Notes

# Ch. 2 Notes - II III AM 8 3%— 20M CHAPTER 2 KEY CONCEPTS...

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Unformatted text preview: II. III. AM 8% 3%— 20M CHAPTER 2 KEY CONCEPTS Cost Terms and Purposes Cost -- Deﬁnition: A. ﬂcsomcc) Artisan“? JV _. ecanum..c ":93- m u . ogmamn‘mn/ M‘ﬁ (KO/(ﬁrs) W 6 \$00 .5 W Waltzes. W576 *5 Cost Objective: My “Cm/{7‘7 74W win-0;. desr'reaf, 4 WWC WWWW 6'; foncu Cost Behavior Patterns Variable and Fixed costs are usually defined in terms of how a total cost changes in reiatidn to fluctuations in activity (voiume) of a chosen cost objective. «w If a given cost changes in total in proportion to changes in activity, it isa ym‘dle cogﬂl/C) —- If a cost remains unchanged in total for a given TIME PERIOD despite wide ﬂuctaations in activity, it is a Ema? Casi Q‘c) . Thus variable and ﬁxed costs must be defined in relation to: (a) a given +itme may? (b) V'me W96." (gfw’zm/fm Jpn-aga- tau-.549. of MD: The concept of relevant range will be very important when we discuss Chs. 3, 9, and 11. A. Assumptions about cost behavior 1. We can always separate TC into VC and FC. " y " ~F '5 ‘L {was a. . . ' ' 0 a n 2. Cost functlons are lmear (over the relevant range)? X My 3. Cost functions are unidimensional. M '7?” e.g. Y m f(X only) y l/ 7 W: or OH = f(DL Hrs. only) X B. Total anti unit costs and cost behavior Qattem over the relevant ran 6 1. TotalFC « Cohsmcf', rejmﬂm M Maw-{y {ad 2. Unit FC (PC/unit) — VIM/{£5 , with («J 0% “£411sz Gama“ 3. UnitVC (VC/unit)— ,3 «(WW (macaw; 4. Total vc—- was chem-{y {aw IV. Elements of Manufacturing Costs A. Direct Material (BM) -~ ml MAW/fa! W 0% [2e Fluff:de +1vﬂce'6/ +0 7’44 5mm? 5 1:11 M fanam/bqﬂf Re 5 ' ,3" (Co’f‘ ("H’C’dfwa Numb-ah B. DirectLabor(DL)-— AN bréor , r'r C. Manufacturing Overhead (OH, or Factory OH, Factory Burden, Indirect Manufacturing Cost) - cam M 1‘ 4:42 #414,196 emf/F Ch.2 Actual Costing System Inventorize actual costs only. Work in Process (WIP) Actual DM Actual DL Actual OH 5 VI. Prime Costs = Congggsjon Costs 2 Product and Period Costs The purpose of distinguishing between product and period costs is to wincix £05425 MC I'WVMH‘MQ Czle Wacﬂca/ as M 455111) determine /""‘“V5< Product Costs: - WW Period Costs: Perpetual vs. Periodic inventory system A. Perpetual inventory system ~~ continuous record of additions and eductions in DM, WI? and finished goods inventories: Facilitates managerial controi and pre aration of interim ﬁnancial statements. M Journal Entry: 1,000 Accounts Payable 1,000 To record DM purchase of \$1,000 on Account. Stores controi . Periodic inventory ~- does not require day-touday records of inventory changes. Instead, costs are recorded by accoant classifications; e. g., Purchases, Freight—In, Purchase Discounts, etc. CoWo/ WOW” I'meéaofes at “AM HI 06‘55574"/ W Q((M - f at ‘1‘: a»? \$66.00;” Cost of Goods Manufactured (CGM), or Cost of Goods-Sold (CGS), statements cannot be prepared untii Ending Inventory (E1) is determined by physical count. Journal Entry: Purchases 1,000 Accounts Payable 1,000 To record DM purchase of \$1,000 on Account. Unless otherwise stated, we will assume PERPE I UAL Wm. . INVENTORY SYSTEM. #560 @2415 ...
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Ch. 2 Notes - II III AM 8 3%— 20M CHAPTER 2 KEY CONCEPTS...

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