braun_ma4_inppt_02

7/25/2019 braun_ma4_inppt_02

1/65

Building Blocksof Managerial

AccountingChapter 2


2/65

Objective 1Distinguish among service,

merchandising, andmanufacturing companies

2Copyright 2015 Pearson Education, Inc.


3/65

Three types of companies

Service

Merchandisers

Manufacturers



4/65

Service Companies

Provide a service ony

!o inventory

"#ampes $dvertising agencies %an&s

'a( )rms

*nsurance companies



5/65

Merchandisers

+ese products purchased fromsuppiers

One inventory account

"#ampes amart

%est %uy

$ma-on.com

+etaiers vs. hoesaers



6/65

Manufacturers

/se abor and other inputs to convertra( materias into )nished products

"#ampes Procter 0 ambe

enera Mis

De Computer

Three inventory accounts



7/65

Manufacturers

Three inventory accounts

+a( materias

or& in process

inished goods



8/65

Objective 2Describe the vaue chain

and its eements



9/65

3aue Chain

$ctivities that add vaue to productsand services and cost money.



10/65

!o( turn to "2415$



11/65

"2416$

11

Cost incurred

Category of the

value chain

Newspaper advertisements

Payment to consultant for advice on location

of new store

Purchases of merchandise

Freight-in

Salespeoples salaries

Depreciation expense on delivery trucksResearch on whether store should sell

satellite radio service

Customer Complaint Department

Rearranging store layoutCopyright 2015 Pearson Education, Inc.

Marketing

R&D

R&D

Purchases

Purchases

Marketing

Distribution

Customer Service

Design


12/65

Objective 7Distinguish bet(een direct

and indirect costs



13/65

Cost Object

$nything for (hich managers (ant aseparate measurement of cost

Direct cost

*ndirect cost



14/65

!o( turn to S248



15/65

S248


Cost incurred Direct or indirectDepreciation of the building

Cost of costume jewelry on the mannequins in

the Juniors Department

Cost of bags used to package customerpurchases at the main registers for the store

The Medina Kohls store managers salary

Cost of the security staff at the Medina store

Manager of Juniors Department

Juniors Department sales clerks

Cost of Juniors clothing

Cost of hangers used to display the clothing in

the store

Indirect

Indirect

Indirect

Indirect

Direct

Indirect

Direct

DirectDirect


16/65

S248 9cont.:


Cost incurred Direct or indirectElectricity for the building

Cost of radio advertising for the store

Juniors clothing buyers salaries (these

buyers buy for all of the Juniors Departmentsof Kohls stores)

Indirect

Indirect

Indirect


17/65

Objective 8*dentify the inventoriabe product

costs and period costs ofmerchandising and manufacturing

)rms



18/65

T(o de)nitions of productcost

Total costs:used internay ony 9(e(i see this in ater chapters:

Inventoriable product costs:usedfor e#terna reporting


t t t


19/65

Copyright 2015 Pearson Education, Inc. 19

nventor a e ro uct ostsand

Period Costs


20/65

*nventoriabe Product Costs;

Merchandiser

< Purchase price from suppiers

< Cost to get ready for sae

< reight4in < *mport duties or tari=s



21/65

*nventoriabe Product Costs;

Manufacturer

Direct materias

Direct abor

Manufacturing overhead

21

Direct Costs

Indirect Costs

Copyright 2015 Pearson Education, Inc.


22/65

Manufacturing Overhead

*ndirect costs reated tomanufacturingthat are not directmaterias or direct abor

*ndirect materias

*ndirect abor

Other indirect manufacturing costs



23/65

!o( turn to S245


COST Period Cost orInventoriable

Product Cost?

If anInventoriableProduct Cost:Is it DM D!

or MO"?1. Cost of mi& purchased from oca dairyfarmers2. Depreciation on Mar&eting Department>scomputers7. Property ta# on dairy processing pant

8. asoine used to operate refrigerated truc&s

deivering )nished dairy products to grocerystores?. Company president>s annua bonus

6. Depreciation on refrigerated truc&s used tocoect ra( mi& from oca dairy famers@. Pastic gaon containers in (hich mi& ispac&aged5. +esearch and deveopment on improving mi&

pasteuri-ation processA. Teevision advertisements for Dairy Pain>s


24/65

Copyright 2015 Pearson Education, Inc. 24

COST Period Cost orInventoriableProduct Cost?

If anInventoriableProduct Cost:Is it DM D!

or MO"?1. Cost of mi& purchased from oca dairyfarmers2. Depreciation on Mar&eting Department>s

computers7. Property ta# on dairy processing pant

8. asoine used to operate refrigerated truc&sdeivering )nished dairy products to grocerystores?. Company president>s annua bonus

6. Depreciation on refrigerated truc&s used tocoect ra( mi& from oca dairy famers@. Pastic gaon containers in (hich mi& ispac&aged5. +esearch and deveopment on improving mi&pasteuri-ation processA. Teevision advertisements for Dairy Pain>sproducts1B. 'ubricants used in running botting

machines11. ages and saaries paid to machine

S245

Period

Period

Period

Period

Product

Product

Product

Product

Product

Product

PeriodDM

MO"

MO"

DM

MO"

D!


25/65

Prime and Conversion Costs



26/65

Direct and *ndirect 'abor Costs

*ncude

Saaries and (ages

ringe bene)ts

Payro ta#es



27/65

Objective ?Prepare the )nancia statementsfor service, merchandising, and

manufacturing companies



28/65

*ncome Statement;Service

Company

Simpest income statement

$ costs are period costs

Service revenues

Operating e#penses

Operating income



29/65

*ncome Statement;Merchandiser

< Saes

Cost of goods sod

ross pro)t Operating e#penses

Operating income



30/65

Cost of oods Sod Cacuation;

Merchandiser

< %eginning inventory

< Purchases

< *mport duties or tari=s< reight4in

Cost of goods avaiabe for sae

"nding inventoryCost of goods sod



31/65

!o( turn to S241B



32/65

S241B

32

Cost of Goods Sold Computation

Beginning inventory $ 3,600

Purchases $45,000Import duties 700

-Freightin 3,300 49,000

Cost of goods avail for sale 52,600

Ending inventory (5,500)Cost of goods sold $47,100



33/65

!o( turn to S2411



34/65

S2411

34

Simpy Eair

Schedue of Cost of oods Sod

%eginning inventory F 2,?BB,BBB

Purchases 21,8BB,BBB

Cost of goods avaiabe F 27,ABB,BBB

"nding inventory 97,28?,BBB:

Cost of goods sod F 2B,6??,BBB



35/65

S2411

35

Simpy Eair

*ncome Statement

Saes revenue F 7A,22?,BBB

Cost of goods sod 2B,6??,BBB

ross pro)t F 15,?@B,BBB

Operating e#penses 6,5?B,BBB

Operating income F 11,@2B,BBB



36/65

Direct Materias /sed Cacuation;Manufacturer

< %eginning ra( materias inventory

< Purchases of ra( materias

< reight in

Materias avaiabe for use

"nding ra( materias inventory

Direct materias used



37/65

!o( turn to S2412



38/65

S2412

38

Thomas BikesComputation of Direct Materials Used

Direct materials used:Beginning raw materials inventory $ 4,100

Purchases of direct materials $16,400

Import duties 1,300

Freight-in 200 17,900

Direct materials available for use 22,000Ending raw materials inventory (1,900)

Direct materials used $20,100



39/65

Cost of oods Manufactured

Cacuation;Manufacturer

< %eginning (or& in process inventory

< Direct materias used

< Direct abor

< Manufacturing overhead

Tota manufacturing costs to

account for "nding (or& in process inventory

Cost of goods manufactured



40/65

Eo( to Cacuate

%eginning inventory < !et purchases

Cost of goods sod < "nding inventory



41/65

Cost of oods Sod Cacuation;Manufacturer

< %eginning )nished goods inventory

< Cost of goods manufactured

Cost of goods avaiabe for sae

"nding )nished goods inventory

Cost of goods sod



42/65

!o( turn to "242?$


"2 2?$ Di t M t i


43/65

"242?$, Direct Materias/sed

43

%ue Sea CompanyDirect Materias /sed

%eginning ra( materiasinventory

F2@,BBB

PusG Purchases of directmaterias

@A,BBB

$vaiabe for use

F

1B6,BBB'essG "nding ra( materiasinventory

971,BBB:

Direct materias used

F

@?,BBBCopyright 2015 Pearson Education, Inc.

"2 2?$ Cost of oods


44/65

"242?$, Cost of oodsManufactured

44

%ue Sea Company

Schedue of Cost of oods Manufactured

%eginning (or& in process inventory F 87,BBB

PusG Manufacturing costs incurredG

Direct materias used @?,BBB

Direct abor 57,BBB

Manufacturing overheadH @B,5BBCost of goods avaiabe F 2@1,5BB

"nding (or& in process inventory925,BBB:

Cost of manufactured F 287,5BB

HManufacturing overheadG

*ndirect abor F 86,BBB

*nsurance on pant 5,BBB

Deprec 4 Pant bdg and eIuip 12,@BB

+epairs and maintenance pant 8,1BB

Manufacturing overhead 9tota: F @B,5BB



45/65

"242?$, Cost of oods Sod

45

%ue Sea Company

Schedue of Cost of oods Sod

%eginning )nished goods inventory F 16,BBB

PusG Cost of goods manufactured 287,5BB

$vaiabe for sae F 2?A,5BB

'essG "nding )nished goods inventory 92A,BBB:

Cost of oods Sod F 27B,5BB



46/65

*ncome Statement;Manufacturer

< Saes

Cost of goods sod

ross pro)t

Operating e#penses

Operating income



47/65

!o( turn to "2426$



48/65

"2426$

48

%ue Sea Company*ncome Statement

Saes revenue

F

7AB,BBB

Cost of goods sod27B,5BB

ross pro)tF1?A,2BB

Operating e#penses

Mar&eting e#penses@6,BBB

enera and admin e#penses

2@,?BBCopyright 2015 Pearson Education, Inc.

P d d P i d C


49/65

Product and Period Costs

49

T#pe of Inventoriable

Product Costs

Period

Costs



50/65

Manufacturing Companies>

*nventory $ccounts

50

$a% Materials Inventor#

< %eginninginventory< Purchases and

freight "ndinginventory

Materias usedin (or& in

process



51/65


*nventory $ccounts

51

&ork in Process Inventor#

< %eginninginventory< Materias used from

ra( materias

"nding

inventory

Cost of goodsmanufactured and sent

to )nished goods< Direct 'abor

< Manufacturingoverhead


f i i


52/65


*nventory $ccounts

52

'inis(ed )oods Inventor#

< %eginninginventory< Cost of goods

manufactured "ndinginventory

Cost of goodssod



53/65

%aance Sheet Di=erences

53

T#pe of Co*pan# Inventor# Accounts

Service Company !one

Merchandiser Merchandise inventory

Manufacturer

+a( materias, (or& in process,

and )nished goods inventory



54/65

Objective 6Describe costs that are

reevant and irreevant fordecision ma&ing


C t b d / t b


55/65

Controabe and /ncontroabe

Costs

Controllable

Management caninJuence or change cost

+ncontrollable

Management cannot

change or inJuence costin the short run


+eevant and *rreevant


56/65

+eevant and *rreevantCosts

56

$elevant

Di=erentia costs, (hich are

costs that di=er bet(eenaternatives

Irreleva

nt

Costs that do not di=erbet(een aternativesor

Sun& costs costs incurred inthe past that cannot bechanged



57/65

Objective @Cassify costs as )#ed or variabeand cacuate tota and average

costs at di=erent voumes



58/65

Cost %ehavior

58

,ariablecosts

Change in tota cost indirect proportion tochanges in voume

'i-edcosts

Stay constant in tota costover a (ide range ofactivity eves


T t 3 i b C t


59/65

Tota 3ariabe Costs

59

$ssume (e pay ?K saes commissions on a saes.

The cost of saes commissions increasesproportionatey (ith increases in saes.


Tota i#ed CostsG Stay Constant in


60/65

yTota over a ide +ange of $ctivity

'eves



61/65

Tota Cost

Tota cost i#ed costs < 93ariabecost per unit # number of units:

61

Example:Fied costs ! "20,000#aria$%e cost per unit ! "50 per unit&u'$er o( units ! 100

)ota% cost ! "20,000 * +"50 100! "25,000



62/65

$verage Cost

Tota cost L number of units $verage cost

The average cost per unit is !OTappropriate for predicting tota costs atdi=erent eves of output.

62

Ea'p%e-"25,000 ! "250 per unit

100 units



63/65

Margina Cost

Cost of ma&ing one more unit



64/65

"nd of Chapter 2



65/65

%% rights reser/ed. &o part o( this pu$%ication 'ay $ereproduced, stored in a retrie/a% syste', or trans'itted, inany (or' or $y any 'eans, e%ectronic, 'echanica%,photocopying, recording, or otherise, ithout the priorritten per'ission o( the pu$%isher. Printed in the nited

tates o( 'erica.

braun_ma4_inppt_02

Documents

Transcript of braun_ma4_inppt_02