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2

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Planning

Control

Managers need cost information toperform each of these functions.

DecisionMaking

Directing

and Motivating


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2


2

()


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Costs

Expenses

(Operation Costs)


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()


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Manufacturing Costs

Non-manufacturing Costs


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2

Period Costs

Product Costs

Manufacturing

Costs

Nonmanufacturing

Costs

Direct

Indirect

Using Cost Information for External Purposes


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(Products Cost)

( Period Cost)


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Products Cost

Periods Cost


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(Measurable)


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  • 1


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-


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-


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(Traceability)


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(Cost Behavior)


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5

  • (Variable Costs)

  • (Step Variable Costs)

  • (Fixed Costs)

  • (Step Fixed Costs)

  • (Mixed Costs)


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(highlow method)

(scatter graph method)

(regression analysis)


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-

high

low


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  • 2 A B


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20 000

20,000


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-

  • -


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  • (Unit Costs)

  • (Total Costs)


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Products cost

Products Cost

DirectMaterials

DirectLabor

ManufacturingOverhead

The Product

Cost of product 1 unit consist of

1 Unit = Direct material+Direct Labor+Manufacturing


Direct materials

Direct Materials

Those materials that become an integral part of the product and that can be conveniently traced directly to it.

Example:A radio installed in an automobile


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(Direct Material) (Variable Cost)

(Indirect Material)

()


Direct labor

Direct Labor

Those labor costs that can be easily traced to individual units of product.

Example:Wages paid to automobile assembly workers


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2

(Direct labor) (Variable Cost)

(Indirect labor)

()


Manufacturing overhead

Manufacturing Overhead

Manufacturing costs that cannot be traced directly to specific units produced.

Manufacturing Overhead costs consist of :

indirect materials + Indirect labor + Others


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DirectLabor

DirectMaterials

ManufacturingOverhead

PrimeCost

ConversionCost


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