COMPONENT OF COST BY G.DINESHPIRAN [DP]
- 1. SEMINAR NAME :V.YUVARAJ REG NO :16230553 CLASS :MECHANICAL "C" SUBJECT :PROCESS PLANNING AND COST ESTIMATION TITLE :COMPONENT OF COST SUTAND SIGN STAFF SIGN
- 2. COST RELATIONSHIPS: MANUFACTURING COMPANY Direct Mat. (Beg) Direct Mat. Purchases Direct Mat. (End) Direct labor incurred Direct Mat. Used + - Overhead costs applied Tot. Mfg. Costs incurred Cost of Goods Mfg. Cost of Goods Sold WIP (Beg) WIP (End) ++ -- Fin Goods (End) Fin Goods (Beg) + + PRIOR PERIOD NEXT PERIOD
- 3. Cost Concepts - 3 Income Statement Manufacturing Company Beg. WIP + Direct Mat’l Used + Direct Labor + Mfg. Overhead - End. WIP = Cost of Goods Mfg.Cost of Goods Mfg. Beg. Fin. Goods + $2,400,000 Cost of Goods Mfg. $2,400,000 Cost of Goods Mfg. -End. Finished Goods = $2,600,000 Cost of Goods Sold $2,600,000 Cost of Goods Sold $4,000,000 Sales $4,000,000 Sales - $2,600,000 Cost of Goods Sold $2,600,000 Cost of Goods Sold = $1,400,000 Gross Margin $1,400,000 Gross Margin - • Selling expenses • Admin. expenses • Income taxes $900,000 Other Oper.Expenses $900,000 Other Oper.Expenses = $500,000 Net Income $500,000 Net Income
- 4. Cost Concepts - 4 Total fixed costsTotal fixed costs do not respond to changesdo not respond to changes in unit level cost drivers within a period.in unit level cost drivers within a period. Total fixed costsTotal fixed costs do not respond to changesdo not respond to changes in unit level cost drivers within a period.in unit level cost drivers within a period. Total fixed costs (Y) Total activity (X) 0 0 Basic Cost Behavior PatternsBasic Cost Behavior Patterns
- 5. Cost Concepts - 5 Variable costs--The cost of the ingredients used to make the pizzas Fixed costs--Depreciation, property taxes, and property insurance Mixed costs--Cost of electricity Step costs--Employee wages Basic Cost Behavior PatternsBasic Cost Behavior Patterns Pizza HutPizza Hut
- 6. Cost Concepts - 6 Methods for Separating Mixed Cost Into Fixed and Variable Components Scatterplot Method The High-Low Method Specific quantitative methods The Method of Least Squares
- 7. Cost Concepts - 7 Month Utility Costs Unit Produced January $2,000 200 February 2,500 400 March 4,500 600 April 5,000 800 May 7,500 1,000 Mixed Costs: An Example
- 8. Cost Concepts - 8 CONVENTIONAL PRODUCT COSTING Overhead Application Predetermined Total budgeted overhead Overhead Rate = Expected level of activity * • Conventional costing typically used volume (or a surrogate for volume such as DLH) • Problems - Budgeted overhead contains both fixed and variable costs - Selection of expected level of activity