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2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
Introduction to Management
Accounting
Chapter 4
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
Learning
Objective 1
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
Learning
Objective 2
Cost
accumulation:
Cost
assignment:
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
Cost assignment
to cost objects
Departments
Activities
Products
Material costs
(metals)
Machining Department Finishing Department
Activity Activity
Activity Activity
Activity Activity
Activity Activity
Cabinets
Cabinets
Desks
Tables
Desks
Tables
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
Cost
A cost is a sacrifice or giving up of
resources for a particular purpose.
Costs are frequently measured by
the monetary units that must be
paid for goods and services.
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
Cost Object
A cost object (objective) is anything for which
A separate measurement of costs is desired.
Customers
Departments
Service
Processing orders
Product
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgs
Learning
Objective 3
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Learning
Objective 4
Cost Allocation
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Cost Pool
A cost pool is a group of individual costs that a company
allocates to cost objects using a single cost-allocation base.
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Cost Allocation
Direct costs are physically traced to a cost object.
Indirect costs are allocated using a cost-allocation base.
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Learning
Objective 5
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Product Costs
Product costs are costs identified with goods
produced or purchased for resale.
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Period Costs
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Learning
Objective 7
All
AllUnallocated
Unallocated
Value
ValueChain
Chain
Costs
Costs
$100,000
$100,000
Cost Driver
[Direct Labor
Hours]
Direct
Direct
Labor
LaborFor
For
Cell
CellPhone
Phone
Casings
Casings
$15,000
$15,000
Unallocated
Unallocated $00,000
$00,000
Sales
Sales $80,000
$80,000
Direct
Direct
Materials
Materials
For
ForPen
Pen
Casings
Casings
$22,500
$22,500
Direct
Direct
Direct
Direct Materials
MaterialsFor
For
Labor
Cell
Labor
Cell
For
Phone
ForPen
Pen
Phone
Casings
Casings
Casings
Casings
$135,000
$12,000
$135,000 $12,000
Sales
Sales $360,000
$360,000
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Cell Phone
Casings
Sales
$440,000 $360,000 $80,000
Direct materials
34,500
22,500
12,000
Direct labor
150,000
135,000
15,000
Indirect manufacturing 220,000
198,000
22,000
Gross profit
$ 35,500 $ 4,500 $31,000
Corporate expenses
100,000
Operating loss
($ 64,500)
Gross profit margin
8.07%
1.25%
38.75%
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
ABC System
Engineers
Engineersand
and
CAD
Equipment
CAD Equipment
$40,000
$40,000
20%
75%
80%
25%
Processing
Activity
$135,000
+ 8,000
$143,000
Production Support
Activity
$45,000
+32,000
$77,000
Cost Driver
Cost Driver
Direct
Direct
Labor
Labor
For
ForPen
Pen
Casings
Casings
$135,000
$135,000
[Distinct Parts]
Direct
Direct
Materials
MaterialsFor
For
Cell
Cell
Phone
Phone
Casings
Casings
$12,000
$12,000
Sales
Sales $80,000
$80,000
Direct
Direct
Materials
Materials
For
ForPen
Pen
Casings
Casings
$22,500
$22,500
All
AllUnallocated
Unallocated
Value
ValueChain
ChainCosts
Costs
$100,000
$100,000
Direct
Direct
Labor
LaborFor
For
Cell
Phone
Cell Phone
Casings
Casings
$15,000
$15,000
Unallocated
Unallocated $00,000
$00,000
Plant
Plantand
and
Machinery
Machinery
$180,000
$180,000
Sales
Sales $360,000
$360,000
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
Internal Purposes
Cell
Pen
Reportin
Phone
g
Casin
Casing
gs
s
Sales
$440,000 $360,000 $80,000
Direct materials
34,500
22,500
12,000
Direct labor
150,000 135,000 15,000
Processing activity
143,000
128,700
14,300
Production support activity
77,000
15,400 61,600
Gross profit
$ 35,500 $ 58,400
($22,900)
Corporate expenses
100,000
Operating loss
($ 64,500)
Gross profit margin
8.07%
16.22%
(28.63%)
External
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst
The End
End of Chapter 4
2005 Prentice Hall Business Publishing, Introduction to Management Accounting 13/e, Horngren/Sundem/Stratton
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ce Hall Business Publishing, Introduction to Management Accounting 14/e, Horngren/Sundem/Stratton/Schatzberg/Burgst