That is product costs have included direct materials

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Unformatted text preview: ng overhead as a product cost, rather this cost is expensed as a period cost. Variable costing vs. (full) absorption costing Be able to find/produce Unit product cost, variable cost Unit product cost, absorption cost Income statement, variable cost Income statement, absorption cost Note: The net income will differ under these two methods by the amount of fixed overhead absorbed into the change in inventory. Be able to do CVP using both methods. Explain advantages/disadvantages of each. Explain effects of JIT on both systems. Activity Based Costing Terms Target Costing forecasted selling price less desired profit Kaizen Costing process that takes current costing process and attempts to reduce product costs and/or increase product quality or production process Other Terms Substitute goods Life cycle costing (Non) value added services Product Life Cycle Development Target Costing Cure for Aids Introduction Kaizen Costing Cure for Diabetes Growth Kaizen Costing DVD players Maturity Standard Costing Coca Cola Decline Standard Costing Horse Whips Activity based costing vs. traditional costing Be able to compare and contrast. Difference is based on the allocation of cost against one common driver (like direct labor hours), vs. the allocation of costs based on several different activities. Cost driver (activity) terms: Unitlevel costs Batchlevel costs Productlevel costs Customerlevel Organizationsustaining Cost pools assigning costs First stage allocation Accumulate costs by activity center Determine activity rates (divide total costs for activity by total units in activity center) Determine costs/unit to activity center Allocate costs/unit out of the activity center to assigned products and services Second stage allocation How to budget The key to completing budgets for tests and homework is to follow directions precisely. Doublecheck that directions have been followed! Budget for dollars and units Prepare: Sales budget Schedule of cash receipts Production budget Direct materials budget Cash disbursements for materials budget Direct labor budget Overhead budget Finished Goods budget Selling and administrative budget Cash budget (consolidate pieces from above) Budgeted income statement Budgeted balance sheet Standard Costing Standard Costing is similar to using budgeted items for costing products, with a reconciliation to actual costs at the end of the period. Where standard costs deviate significantly from actual costs, the differences should be investigated and explained. Management by Exception Where standard costs deviate significantly from actual costs, the differences should be investigated and explained. When standard costs are essentially the same as actual costs, management is essentially "correct" in their cost predictions, and can focus their energies elsewhere. What kind of standards to use? Ideal Best ca...
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