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2



Planning

Control

Managers need cost information toperform each of these functions.

DecisionMaking

Directing

and Motivating




()


Costs

Expenses

(Operation Costs)


()


Manufacturing Costs

Non-manufacturing Costs



Period Costs

Product Costs

Manufacturing

Costs

Nonmanufacturing

Costs

Direct

Indirect

Using Cost Information for External Purposes


(Products Cost)

( Period Cost)


Products Cost

Periods Cost


(Measurable)


  • 1


-


-


(Traceability)


2



(Cost Behavior)


5

  • (Variable Costs)

  • (Step Variable Costs)

  • (Fixed Costs)

  • (Step Fixed Costs)

  • (Mixed Costs)









(highlow method)

(scatter graph method)

(regression analysis)


-

high

low




-

  • 2 A B



20,000


-

  • -


-



2

  • (Unit Costs)

  • (Total Costs)




Products Cost

DirectMaterials

DirectLabor

ManufacturingOverhead

The Product

Cost of product 1 unit consist of

1 Unit = Direct material+Direct Labor+Manufacturing


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


2

(Direct Material) (Variable Cost)

(Indirect Material)

()


Direct Labor

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

Example:Wages paid to automobile assembly workers


2

(Direct labor) (Variable Cost)

(Indirect labor)

()


Manufacturing Overhead

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

Manufacturing Overhead costs consist of :

indirect materials + Indirect labor + Others


DirectLabor

DirectMaterials

ManufacturingOverhead

PrimeCost

ConversionCost


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