Kế toán, kiểm toán - Chapter 2: Basic cost management concepts and accounting for mass customization operations

Basic Cost Management Concepts and Accounting for Mass Customization OperationsChapter 2Process of ManagementDecisionMakingDirectingControlPlanningStrategy FormulationManagers need cost information toperform each of these functions.Learning Objective 01Product Costs, Period Costs and ExpensesProduct costs are costs associated with goods for sale until the time period during which the products are sold, at which time the costs become expenses.Period costs are costs that are expensed during the time period in which they are incurred.Expenses are the consumption of assets for the purpose of generating revenue. Merchandiser Current AssetsCashReceivablesPrepaid ExpensesMerchandise Inventory Manufacturer Current AssetsCashReceivablesPrepaid ExpensesInventoriesRaw MaterialsWork in ProcessFinished GoodsCost Classifications on Financial Statements – Balance SheetTypes of Production ProcessesType of ProductionDescription ofExample ofProcessProcessManufacturer   Job ShopLow volumeDisney Little standardization  Unique products    BatchMultiple productsCaterpillar Low volume    Assembly LineA few major productsFord Higher volume       Mass CustomizationHigh volumeDell Many standardized components  Customized combination of components    Continuous FlowHigh volumeExxon Highly standardized commodity products Manufacturing CostsTheProductDirectLaborManufacturing OverheadDirectMaterialClassifications of Costs in Manufacturing CompaniesPrimeCostConversionCostManufacturing costs are oftencombined as follows:DirectMaterialDirectLaborManufacturingOverheadManufacturing Cost FlowsManufacturingOverheadDirect MaterialDirect LaborFinishedGoods InventoryCost of GoodsSold Work in Process InventorySchedule of Cost of Goods ManufacturedBeginning work-in-process inventory is carried over from the prior period.Ending work-in-process inventory contains the cost of unfinished goods, and is reported in the current assets section of the balance sheet.Income Statement for a ManufacturerIncome Statement for a ManufacturerActivities that cause costs to be incurred are called COST DRIVERSCost Driver Examples Activity Cost Driver Machining operations Machine hours Setup Setup hours Production scheduling Manufacturing ordersInspection Pieces inspected Purchasing Purchase orders Shop order handling Shop orders Valve assembly support Customer RequisitionsCost ClassificationsVarious CostsDirect costs: Costs that can be easily and conveniently traced to a product or department.Indirect costs: Costs that must be allocated in order to be assigned to a product or department.Controllable and Uncontrollable Costs: A cost that can be significantly influenced by a manager is a controllable cost.Opportunity Costs: The potential benefit that is given up when one alternative is selected over another.Sunk Costs: All costs incurred in the past that cannot be changed by any decision made now or in the future are sunk costs. Sunk costs should not be considered in decisions. Differential Costs: Costs that differ between alternatives. Marginal Cost: The extra cost incurred to produce one additional unit.Average Cost: The total cost to produce a quantity divided by thequantity produced.