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2010 The McGraw-Hill Companies, Inc.
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2010 The McGraw-Hill Companies, Inc.
Presented to:
Athar Ikram Khan
Presented by:Faizan Anjum (2113189)
Saqib Iqbal (2113201)
Malik Zeeshan (2113235)
Sadaf Naeem(2113152)
Managerial Accountingand Cost Concepts
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McGraw-Hill/Irwin Slide 3
Planning
Controlling
Directing and
Motivating
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McGraw-Hill/Irwin Slide 4
Identifyalternatives.
Select alternative that doesthe best job of furtheringorganizations objectives.
Develop budgets to guideprogress toward theselected alternative.
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McGraw-Hill/Irwin Slide 6
The control function ensuresthat plans are being followed.
Feedback in the form of performance reportsthat compare actual results with the budgetare an essential part of the control function.
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The Product
DirectMaterials
DirectLabor
ManufacturingOverhead
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Raw materials that become an integralpart of the product and that can beconveniently traced directly to it.
Example: A radio installed in an automobile
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Those labor costs that can be easily tracedto individual units of product.
Example: Wages paid to automobile assembly workers
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Those labor costs that can be easily traced toindividual units of product.
Example: Wages paid to automobile assembly workers
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Product costs includedirect materials, direct
labor, and
manufacturingoverhead.
Period costs include allselling costs and
administrative costs.
Inventory Cost of Good Sold
BalanceSheet
IncomeStatement
Sale
Expense
IncomeStatement
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Merchandisers . . .
Buy finishedgoods.
Sell finishedgoods.
Manufacturers . . .
Buy rawmaterials.
Produce and sellfinished goods.
MegaLoMart
McGraw-Hill/Irwin
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Cost of goods sold for manufacturers differs onlyslightly from cost of goods sold for merchandisers.
Manufacturing Company
Cost of goods sold:Beg. finished
goods inv. 14,200$
+ Cost of goods
manufactured 234,150
Goods available
for sale 248,350$- Ending
finished goods
inventory (12,100)
= Cost of goods
sold 236,250$
Merchandising Company
Cost of goods sold:Beg. merchandise
inventory 14,200$
+ Purchases 234,150
Goods available
for sale 248,350$
- Endingmerchandise
inventory (12,100)
= Cost of goods
sold 236,250$
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Direct costs
Costs that can beeasily and
conveniently tracedto a unit of productor other cost object.
Examples: direct
material and directlabor
Indirect costs
Costs that cannot beeasily and
conveniently tracedto a unit of productor other cost object.
Example:
manufacturingoverhead
McGraw-Hill/Irwin
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Sunk costs have already been incurred and cannot bechanged now or in the future. These costs should
be ignored when making decisions.
Example: You bought an automobile that cost$10,000 two years ago. The $10,000 cost is sunkbecause whether you drive it, park it, trade it, or sellit, you cannot change the $10,000 cost.
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The labor costs incurred
during idle time are ordinarilytreated as manufacturing
overhead.
MachineBreakdowns
MaterialShortages
PowerFailures
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The overtime premiums for all factoryworkers are usually considered to be part
of manufacturing overhead.
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McGraw-Hill/Irwin Slide 22
PreventionCosts
Support activitieswhose purpose is toreduce the number of
defects
Appraisal Costs
Incurred to identifydefective products
before the products areshipped to customers
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McGraw-Hill/Irwin Slide 23
Internal FailureCosts
Incurred as a result ofidentifying defects
before they are shipped
External FailureCosts
Incurred as a result ofdefective productsbeing delivered to
customers
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