ch02-instructor-AFM102s10

ch02-instructor-AFM102s10 - 2-1 Costs Terms, Concepts and...

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Managerial Accounting 2-1 Costs Terms, Concepts and Classifications Chapter Two
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Managerial Accounting 2-2 Manufacturing Costs direct materials - raw materials that become an integral part of the product and that can be conveniently traced directly to it direct labour - labour costs that can be easily traced to individual units of product manufacturing overhead - Manufacturing costs that cannot be traced directly to specific units produced
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Managerial Accounting 2-3 Manufacturing Overhead All other manufacturing costs (other than direct materials and direct labour) Indirect Labor Indirect Material Other Costs Items that are hard to trace directly to a product or service Small $ material costs (e.g., glue in running shoes) Maintenance staff salaries Depreciation on equipment used to manufacture    several different products(other costs)
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Managerial Accounting 2-4 Non-manufacturing Costs Selling Costs Costs necessary to get the order and deliver the product. Administrative Costs All executive, organizational, and clerical costs.
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Managerial Accounting 2-5 iClicker – Question 1 Which of the following costs would be a product cost? a. indirect materials b. advertising c. administrative salaries d. shipping costs e. sales commissions. Indirect materials would be part of manufacturing overhead, and thus it would be a product cost.
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Managerial Accounting 2-6 Treatment of idle time: If product specific (e.g., waiting on raw materials or repairs on a product-specific piece of equipment: direct labour If not product specific (e.g., machine break-down): manufacturing overhead Example: A worker is paid $25 per hour for a 40-hour work-week and is idle for 6 hours in a week due to raw material shortages, labour would be broken down as follows: Direct labour ( 34 x $25 ) $ 850 Manufacturing overhead ( 6 x $25 ) $ 150 Total labour cost for the week $1,000 Idle Time
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Managerial Accounting 2-7 Overtime The overtime premiums for all factory workers are usually considered to be part of manufacturing overhead . Product specific h job sepecific h overtime premiums are part of direct labour . Overtime is often caused by conditions related to several products (e.g., high level of demand during peak periods).
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Managerial Accounting 2-8 Employee Benefits Employee benefits include employment taxes, medical plans, and pension costs. Some companies include all of these costs in manufacturing overhead. Other companies treat employee benefit expenses of direct labourers as additional direct labour costs.
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Managerial Accounting 2-9 Overtime: premium (overtime rate- base rate) * (extra hours) Basic rate $24/hour, Overtime, $36/hour, 40- hour week 1. 45 hours in a week. Total wages? Direct labour? Overhead? 12*5 2. 50 hours, including 4 hours idle time (equipment breakdown). Total wages? Direct labour? Overhead? 3.
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ch02-instructor-AFM102s10 - 2-1 Costs Terms, Concepts and...

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