© 2009 Factory Strategies Group LLC. All rights reserved. Manufacturing Cost Accounting Enterprise Excellence Series.

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Presentation transcript:

© 2009 Factory Strategies Group LLC. All rights reserved. Manufacturing Cost Accounting Enterprise Excellence Series

2 © 2009 Factory Strategies Group LLC. All rights reserved. Outline Cost Terms, Concepts, and Classifications Job Order Costing Cost Behavior Cost – Volume – Profit Activity Based Costing Profit Planning Standard Costs Flexible Budgets and Overhead Analysis Relevant Costs for Decision-Making

3 © 2009 Factory Strategies Group LLC. All rights reserved. Product Costs - A Closer Look Costs associated with the goods that are completed during the period are transferred to finished goods inventory.

4 © 2009 Factory Strategies Group LLC. All rights reserved. The Contribution Format The contribution margin format emphasizes cost behavior. Contribution margin covers fixed costs and provides for income.

5 © 2009 Factory Strategies Group LLC. All rights reserved. Calculating Breakeven in Units Here is the information from Wind Bicycle Co.:

6 © 2009 Factory Strategies Group LLC. All rights reserved. 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 © 2009 Factory Strategies Group LLC. All rights reserved. The Direct Materials Budget

8 © 2009 Factory Strategies Group LLC. All rights reserved. Labor Variances Summary Actual Hours Actual Hours Standard Hours × × × Actual Rate Standard Rate Standard Rate Rate variance $310 unfavorable Efficiency variance $300 unfavorable 1,550 hours 1,550 hours1,500 hours × × × $6.20 per hour$6.00 per hour$6.00 per hour = $9,610 = $9,300= $9,000

9 © 2009 Factory Strategies Group LLC. All rights reserved. Flexible Budget Performance Report CheeseCo

10 © 2009 Factory Strategies Group LLC. All rights reserved. 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.