Sec D - Cost Management Flashcards
Cost Measurement Methods
Actual Costing:
• Actual direct materials cost
• Actual direct labor cost
• Actual manufacturing overhead cost to a unit of output
Normal Costing:
• Actual direct material cost
• Actual direct labor cost
• Standard manufacturing overhead cost to a unit of output
Standard Costing:
• Standard direct material cost
• Standard direct labor cost
• Standard manufacturing overhead cost to a unit of output
Production Costing
FIFO method
1) Prepare Quantity schedule
2) Calculate Equivalent Units of Production (EUP) for Direct Materials and Conversion Costs; counts beg WIP based on % completed
3) Calculate Cost per equivalent units = Total Costs / EUP (Cost of Beg WIP is not included)
4) Calculate Cost of units transferred = Beg WIP cost + (units started/completed x whole unit EUP)
5) Calculate Ending inventory = Ending WIP units x Material cost per EUP + Ending WIP units of conversion costs x Conversion cost EUP
Production Costing
Weighted average method
1) Prepare Quantity schedule
2) Calculate Equivalent Units of Production (EUP) for Direct Materials and Conversion Costs; counts beg WIP units 100%
3) Calculate Cost per equivalent units = Total Costs / EUP (Cost of Beg WIP is included)
4) Calculate Cost of units transferred = Beg WIP cost + (units started/completed x whole unit EUP)
5) Calculate Ending inventory = Ending WIP units x Material cost per EUP + Ending WIP units of conversion costs x Conversion cost EUP
Overhead Cost Allocation Methods
Traditional Overhead Cost: • uses one cost driver • easier and less expensive • related to volume, no clear cause & effect • less accurate • difficult to do cost chain analysis
Activity-Based Overhead Allocation: • multiple cost drivers • difficult to implement • cause and effect • suitable for value chain analysis
Service/Support Department Allocations
Direct Method:
• No allocation between service departments
Step-Down Method:
• Identify which dept provides most service, allocate its costs using proportional ratios
Reciprocal Method: • Uses algebra to solve for each dept’s share of each other’s costs Example: • M = 150,000 + 3/13 N • N = 120,000 + 1/16 M
Theory of Constraints Analysis
Identify exploit subordinate elevate repeat
Throughput Costing
only considers direct materials and perhaps sales commissions as the only products costs
Throughput contribution =
sales - direct materials
Business process improvement
Design measure analyze improve/design control/verify
Value chain analysis
internal cost analysis
internal differentiation analysis
Vertical linkage analysis
Continuous improvement aims to achieve…
Ideal standards
