09_OverheadsForChen - Objectivesfortoday Fundamentals of...

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ACCY 302 (Chen) Fall 2009, Class 9 1 Objectives for today I. Fundamentals of cost accounting cost behavior introduction to absorption costing and variable costing I. Using cost behavior in cost-volume-profit (CVP) analyses CVP model breakeven model
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ACCY 302 (Chen) Fall 2009, Class 9 2 I. Fundamentals of cost accounting
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ACCY 302 (Chen) Fall 2009, Class 9 3 From the syllabus: "To maintain or decrease costs or to develop new products/services, managers need to focus on the activities required to make products/deliver services, not on the final products/services themselves." These activities are called “cost drivers” A measure of some activity that affects costs
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ACCY 302 (Chen) Fall 2009, Class 9 4  (continued) Costs are sacrifices of resources Costs in Kraft's production department may include: wages for line workers and supervisors maintenance costs insurance electricity Costs of depositing customers' payments may include: wages for the accounting clerk computer time
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ACCY 302 (Chen) Fall 2009, Class 9 5  (continued) Anything for which a separate measure of costs is desired is called a “cost objective” cost objectives can be: departments (e.g., production) activities (e.g., depositing customers' payments) customer type (e.g., rural, urban) A cost objective needs to be defined before its total costs can be broken down for further analysis
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ACCY 302 (Chen) Fall 2009, Class 9 6  (continued) The total costs for a given cost objective can be broken down into two categories: direct costs indirect costs
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ACCY 302 (Chen) Fall 2009, Class 9 7  (continued) direct costs costs that can be specifically and exclusively identified with a cost objective e.g., if our cost objective is: a box of macaroni & cheese, then noodles, cheese, and the cardboard used for the box are direct costs processing customer checks, then the salary of a clerk that only processes checks is a direct cost
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ACCY 302 (Chen) Fall 2009, Class 9 8  (continued) indirect costs costs that cannot be specifically and exclusively identified with a cost objective e.g., if our cost objective is a: box of macaroni & cheese, then insurance and electricity for the production plant are indirect costs processing customer checks, then the salary of a supervisor in the accounting department is an indirect cost
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ACCY 302 (Chen) Fall 2009, Class 9 9  (continued) WARNINGS! 1)
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This note was uploaded on 11/08/2011 for the course ACCY 302 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.

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09_OverheadsForChen - Objectivesfortoday Fundamentals of...

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