1. 1 Manufacturing Cost Accounting http://www.managementsupport.com http://www.managementsupport.com

2. 2 Outline Cost Terms, Concepts, and Classifications Cost Terms, Concepts, and Classifications Job Order Costing Job Order Costing Cost Behavior Cost Behavior Cost – Volume – Profit Cost – Volume – Profit Activity Based Costing Activity Based Costing Profit Planning Profit Planning Standard Costs Standard Costs Flexible Budgets and Overhead Analysis Flexible Budgets and Overhead Analysis Relevant Costs for Decision-Making Relevant Costs for Decision-Making

3. 3 Product Costs - A Closer Look Costs associated with the goods that are completed during the period are transferred to finished goods inventory.

4. 4 The Contribution Format The contribution margin format emphasizes cost behavior. Contribution margin covers fixed costs and provides for income.

5. 5 Calculating Breakeven in Units Here is the information from Wind Bicycle Co.:

6. 6 The Master Budget Direct Materials Budget Ending Inventory Budget Production Budget Selling and Administrative Budget Direct Labor Budget Manufacturing Overhead Budget Cash Budget Sales Budget Budgeted Financial Statements

7. 7 The Direct Materials Budget

8. 8 Actual Hours Actual Hours Standard Hours × × × Actual Rate Standard Rate Standard Rate Labor Variances Summary Rate variance $310 unfavorable Efficiency variance $300 unfavorable 1,550 hours 1,550 hours 1,500 hours × × × $6.20 per hour $6.00 per hour $6.00 per hour = $9,610 = $9,300 = $9,000

9. 9 Flexible Budget Performance Report CheeseCo

10. 10 Utilization of a Constrained Resource Let’s calculate the contribution margin per unit of the scarce resource, machine A1. If there are no other considerations, the best plan would be to produce to meet current demand for Product 2 and then use remaining capacity to make Product 1.