Chapter 2 Cost Concepts and the Cost Accounting Information Systems Pertemuan ke 2

Learning Objectives Mampu mendefinisikan pengertian cost object Mampu menjelaskan term direct cost and indirect cost Considerate for creating a cost accounting information system Explain about cost classification

COST CONCEPTS Cost versus Expense Cost object is defined as any item or activity for which costs are accumulated and measured Traceability of Costs to Cost Object Cost traceability in Service Industries

The Cost Information System An integrated and coordinated information system provide information needed by managers Designing a cost accounting information system requires an understanding of both the organizational structure and the type of information required. Chart of Accounts Electronic Data Processing (EDP)

Classifications of Costs PRODUCT, as follow : Manufacturing Costs : Direct Materials, Direct Labor and Factory Overhead ( indirect material, indirect labor and other factory costs ) Commercial Expenses : Marketing Expenses and Administrative Expenses

Classifications of Costs VOLUME OF PRODUCTION, as follow: Variable Cost change in proportion to changes in activity within a relevant range. Fixed cost are constant in total amount within a relevant range of activity Semi Variable cost contain both fixed and variable elements

Classifications of Costs MANUFACTURING DEPARTMENTS, as follow : Producing Departments and Service Department Direct Departmental Cost and Indirect Departmental Cost Common Costs and Joint Cost

Classifications of Costs ACCOUNTING PERIOD, as follow : Capital Expenditure Revenue Expenditure DECISION, ACTION OR EVALUATION Differential Cost Sunk Cost

PRODUCT Manufacturing Cost= Direct Materials + Direct Labor + Factory Overhead Prime Cost= Direct Materials + Direct Labor Convertion cost = Direct Labor + factory overhead

DIRECT MATERIALS: materials that form an integral part. DIRECT LABOR: converts direct materials into finished product. FACTORY OVERHEAD: all manufacturing costs not traced directly to specific output. Factory Overhead= Indirect Materials + Indirect Labor + Other Indirect Cost

INDIRECT MATERIALS: needed for the completion of a product part of the product. INDIRECT LABOR: not directly traced to the composition of finished product; e.g. wages, maintenance Manufacturing Cost + Commercial Expenses = Total Operating Cost

COMPUTER INTEGRATED MANUFACTURING: employing database management technology on a company-wide scale. Commercial Expense= marketing + administrative

COST IN RELATION TO THE VOLUME OF PRODUCTION VARIABLE COST: change in proportion to changes in activity within a relevant range. FIXED COST: constant in total amount within a relevant range of activity. SEMIVARIABLE COST: contain both fixed and variable components.

COST IN RELATION TO MANUFACTURING DEPARTMENTS OR OTHER SEGMENTS PRODUCING DEPARTMENTS: manual and machine operation such as forming and assembling. SERVICE DEPARTMENT: rendered for the benefit of other departments. COMMON COST: cost of facilities/services; employed by two or more operations. JOINT COST: one product makes it inevitable that one or more products are produced.

COST IN RELATION TO AN ACCOUNTING PERIOD CAPITAL EXPENDITURE: intended to benefit future periods, reported as an asset. REVENUE EXPENDITURE: benefits the current period and is reported as an expense.

COSTS IN RELATION TO A DECISION, ACTION OR EVALUATION DIFFERENTIAL COST: one name for a cost that is relevant to a choice among alternatives. OUT-OF-POCKET COST: differential cost will be incurred only if one particular alternative is followed. OPPORTUNITY COST: amount/revenue that will be missed or lost if a particular alternative is followed. SUNK COST: irrelevant to the decision. AVOIDABLE: relevant to the decision. UNAVOIDABLE: may be unaffected by the decision. BALANCED SCORECARD: tool for implementing an organization's strategy; set of important interconnected performance measures.