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Cost Concepts and Classifications: Fixed Vs Direct Vs Variable Indirect Functional Vs Behavioral
Cost Concepts and Classifications: Fixed Vs Direct Vs Variable Indirect Functional Vs Behavioral
COST CONCEPTS
AND CLASSIFICATIONS
Fixed vs Direct vs
Variable Indirect
Functional vs Behavioral
Cost Concepts - 2
COST CLASSIFICATIONS
Functional
Product
Marketing
R&D
Admin
Cost Concepts - 3
COST CLASSIFICATIONS
Functional Product Detail
Product
Marketing
Mfg. R&D
Overhead Admin
Materials
COST CLASSIFICATIONS
Behavioral
Variable
Product
Marketing
R&D
Admin
Fixed
Cost Concepts - 5
COST CLASSIFICATIONS
Responsibility
Variable
A
Product
Marketing
R&D
C Admin
B
Fixed
Cost Concepts - 6
Fin Goods
WIP (Beg)
(Beg)
Direct Mat.
(Beg)
Direct Mat.
Used + +
+
+
Direct Mat. Direct labor Tot. Mfg. Costs Cost of Goods Cost of Goods
Purchases incurred incurred Mfg. Sold
- +
- -
Overhead costs
Direct Mat. applied
(End)
Fin Goods
WIP (End) (End)
NEXT
PERIOD
Cost Concepts - 7
Income Statement
Manufacturing Company
INCOME STATEMENT
Service Organization
$4,000,000
Sales
-
$2,600,000
Cost of Services Direct Materials/ Supplies
= Direct Labor
Indirect Costs or Overhead
$1,400,000
Gross Margin
-
$900,000 Selling Expenses
Operating Expenses Administrative Expenses
= Income taxes
$500,000
Net Income
Cost Concepts - 9
Total
fixed
costs (Y)
0
0 Total activity (X)
Cost Concepts - 10
Fixed Costs
Fixed Costs
Total
variable
costs (Y)
0
0 Total activity (X)
Cost Concepts - 13
Total
mixed Sometimes
costs (Y) called
semivariable
costs
0
0 Total activity (X)
Cost Concepts - 14
Total
step
costs (Y)
0
0 Total activity (X)
Cost Concepts - 15
Pizza Hut
Y = a + bX
totalvertical slope
costs axis intercept (an of
value
approximation
(an approximation of
independent
of
fixedvariable
costs) costs per unit
variable
of X)
Cost Concepts - 18
Scatterplot Method
The High-Low Method
Specific quantitative methods
The Method of Least Squares
Cost Concepts - 19
Utility
Cost Scatterplot Method
$8,000
Y = $2,000 x $2.50X
Composition of
Manufacturing Costs
Direct
Materials
Traceable
Indirect Overhead to
be Assigned
?
Cost Concepts - 26
Composition of
Manufacturing Costs
Prime costs = Direct materials +
Direct labor
Changing Composition of
Total Manufacturing Costs
100
Key considerations
Applied overhead is the basis for computing per-
unit overhead cost
Problems
- Budgeted overhead contains both fixed and
variable costs
Impact of Computers on
Manufacturing
Automatic
identification systems
(AIS) allow inventory
and production
information to be
entered into a
computer without
writing or keying.
Cost Concepts - 33
Impact of Computers on
Manufacturing
Computer-aided
design (CAD)
involves the use of
computers to
design products.
Cost Concepts - 34
Impact of Computers on
Manufacturing
Computer-aided manufacturing
(CAM) involves the use of computers
to control machine operations.
Cost Concepts - 35
Impact of Computers on
Manufacturing
In their advanced stages, factories
utilizing flexible manufacturing systems
and computer-integrated manufacturing
Flexible manufacturing
systems (FMS) are areansometimes
extension referred to as lights-out
factoriesbecause
of computer-aided they can be operated
Computer-integrated
manufacturing techniquesmanufacturing (CIM) is the
in the dark.
through a seriesultimate
of extension of CAD, CAM,
and FMS concepts to a completed
manufacturing operations.
automated and computer-
controlled factory.