Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 2

Charlene Y.

Sanchez
ABM 12 - A

B. Cost classified according to the timing of  Semi variable Cost – include repairs,
recognition as expense monthly telephone charges, indirect
materials, indirect labor, fuel and power.
 Product Cost - cost of sales, only when sold. Telephone charges, for example, are made
All manufacturing costs (direct materials, up of a service charge plus extra charges for
direct labor, and factory overhead.) extra telephones and long-distance calls.
 Period Cost - selling expenses and
administrative expenses E. Cost classified by types of inventory

C. Cost classification on financial Statements  Raw materials


 Goods and Process
 Raw materials
 Finished goods
 Merchandise Inventories
- Raw materials Example: When a manufacturer decides to
- Goods and Process make a product, it must order the basis stock
- Finished goods needed to build the product. This stock could be
bars of steel, sheets of metal, or blanks of
Example: When a manufacturer decides to plastic—anything in its raw form. The stock is
make a product, it must order the basis stock classified as raw materials inventory. These raw
needed to build the product. This stock could be materials are machined and put through the
bars of steel, sheets of metal, or blanks of assembly process. This process could take days
plastic—anything in its raw form. The stock is or weeks. In the meantime, these goods are
classified as raw materials inventory. These raw transferred from the raw materials account into
materials are machined and put through the the work in process inventory account. After the
assembly process. This process could take days goods have made it through the entire assembly
or weeks. In the meantime, these goods are line and are completely ready for sale, they are
transferred from the raw materials account into transferred out of the work in process account
the work in process inventory account. After the to the finished goods inventory account.
goods have made it through the entire assembly
line and are completely ready for sale, they are F. Cost classification according to traceability to
transferred out of the work in process account cost objectives
to the finished goods inventory account.
 Direct Cost - Examples include materials and
D. Cost classification for predicting cost direct labor. Some operating expenses can
behavior also be classified as direct costs, such as
advertising cost for a particular product.
 Variable Cost - Examples include direct - Traceable - a company may incur
materials, direct labor, and sales the cost of building insurance for its
commission based on sales. production facility
 Fixed Cost - include rent, insurance, and - Separable - Examples of separable
depreciation using the straight line method. costs includes; cost incurred during
manufacturing, transporting and
distributing the products, and also that the company incurred in that month
marketing of the products was $98,000. Therefore, Higgins
 Indirect Cost – Examples include factory experienced $8,000 of under absorbed
overhead and operating costs that benefit overhead. In February, Higgins produced
more than one product, department, or 60,000 widgets, so it allocated $120,000 of
branch. overhead. The actual amount of
manufacturing overhead that the company
G. Cost Classification according to managerial incurred in that month was $109,000.
influence Therefore, Higgins experienced $11,000 of
 Controllable Cost – advertising, bonuses, over absorbed overhead.
direct materials, donations, dues and  Direct Costing - The costs actually
subscriptions, employee compensation, consumed when you manufacture a
office supplies, training. product; The incremental increase in costs
 Non Controllable Cost - include an when you ramp up production; The costs
employee's rate of pay that they cannot that disappear when you shut down a
change themselves or the rent that a production line; The costs that disappear
landlord charges for use of the company's when you shut down an entire subsidiary
premises.  Information Cost - purchase price of
information, cost of locating information,
H. Cost terminologies used for planning and time and expertise to analyze information,
control costs of physical travel that may be required
to obtain certain types of information
 Standard Cost - as past experiences,
 Ordering Cost - Cost to prepare a purchase
budgeted amounts, industry standards, etc.
requisition, cost to prepare a purchase
 Budgeted cost - For example, management
order, cost of the labor required to inspect
might think that demand might increase 10
goods when they are received
percent next year, so they take the current
 Out of pocket Cost - purchase of gasoline,
sales figure and add 10 percent in the
parking, and tolls while engaged in
budget. Next management must figure out
company business.
what expenses are associated with
producing this amount of product. These
estimated expenses are considered
budgeted costs.
 Absorption Costing - For example, Higgins
Corporation budgets for a monthly
manufacturing overhead cost of $100,000,
which it plans to apply to its planned
monthly production volume of 50,000
widgets at the rate of $2 per widget. In
January, Higgins only produced 45,000
widgets, so it allocated just $90,000. The
actual amount of manufacturing overhead

You might also like