SPOILAGE, REWORK AND SCRAP
Accounting for failure
In Chapters 4 and 17 we assumed that all output
consisted of good units of product (no major
defects, scrap, etc.)
But this will not usually be true!
How do job and proces
Chips, chickens, and costs per equivalent
Note: Definitely bring textbooks (hard copy
or laptop with online access)
to class on Chapter 17 days!
COST BEHAVIOR AND COST-FUNCTION
Do we have unit-level or batch-level costs?
Do we have fixed or product-sustaining costs?
What is the best cost driver?
Does our firm have a large amount of product-level
Learning more about
accounting for overhead costs
Note: The approach to ABC in this chapter is the same
as in AIS 211 Ch. 5, Appendix. Concepts in Action, p.
173, describes TDABC, which was covered in AIS 211
Support Department Costs, and
Common Costs and Revenues
Sharing costs for shared services
Practical problem with support department
We have indirect costs that are really hard to
associate with important cost objects (e.g.,
Decision making and relevant information
Using cost information for making
Our firm is considering a variety of short-term
and medium-term decisions
Outsource a routine function?
Carry more or less inventory?
Flexible Budgets and
Direct Cost Variances
Why did actual profit not equal budgeted
Actual profits budgeted profits
The future is impossible to predict perfectly
If we knew why actual profits budgeted
profits and kne
Planning with fixed and variable costs
Sensitivity analysis and risk
Sales of our product have been fairly stable in recent
years, and so have costs. On a per-unit basis:
Sales revenue $100
CGS & se
Inventory costing and capacity analysis
The choice and problem of the
GAAP and IRS require that inventories be valued
at full actual cost (manufacturing FC + VC)
Allocating fixed manufacturing costs to products
Balanced Scorecard and
Strategic Profitability Analysis
Linking performance measures to
Financial performance (e.g., profit) is important, but
some factors that are important to organizational
performance and to the