Service Income Statement All are period costs no inventory Service Revenues Operating Expenses period costs value chain Operating Income Income Statement for Merchandiser Manufacturer Sales Revenues COST OF GOODS SOLD inventoriable product costs Gross Profit Operating Expenses value chain Operating Income Cost of Goods Sold Merchandiser merchandising inventory Beginning Inventory Purchases Import Duties Tariffs Freight In Cost of goods available for sale Ending Inventory COST OF GOODS SOLD Predetermined Manufacturing Overhead Rate POHR POHR Total estimated manufacturing overhead costs Total estimated amount of allocation base Allocated MOH POHR x Amt cost allocation acvty used Cost of Goods Sold Manufacturer Flow DM used CGM CGS Direct Materials Used Beginning raw materials inventory Purchases of raw materials Freight in Materials available for use total Ending raw materials inventory DIRECT MATERIALS USED Cost of Goods Manufactured Beginning work in process inventory DIRECT MATERIALS USED Direct labor Manufacturing Overhead Total manufacturing costs to account for total Ending work in process inventory COST OF GOODS MANUFACTURED Cost of Goods Sold Beginning finished goods inventory COST OF GOODS MANUFACTURED Cost of goods available for sale total Ending finished goods inventory COST OF GOODS SOLD International Financial Reporting Standards IFRS worldwide standards result of globalization Sarbanes Oxley Act of 2002 SOX restore trust in publicly traded companies management CEO CFO must sign all financial statements independent audit committee Extensible Business Reporting Language XBRL tagging system Sustainability the ability to meet needs of present without compromising ability of future generations to meet own needs Shifting Economy from manufacturing towards service Enterprise Resource Planning system that integrates streamlines all company functions departments and data expensive Total Quality Management TQM superior products services ISO Controller accounting and tax reporting Treasurer raising capital stocks bonds investing funds Value Chain R D Design Production Purchases Marketing Distribution Customer Service Cost object anything for which managers want a sep measure of cost Manufacturing Overhead Indirect Materials Indirect Labor Other Indirect materials glue for desk Indirect labor plant supervisor Other Depreciation taxes wages for indirect labor rent maintenance utilities Inventoriable Product Costs Direct Labor Direct Materials Man OH Direct Costs can be traced directly to a cost object Indirect Costs must be allocated to a cost object not direct Prime Costs direct materials direct labor create product Conversion Costs direct labor manufacturing overhead finish it Benefits of adopting ABC when producing many diff products Traditional Production large inventories employees do 1 thing Lean Production self contained cells broad skill set for employees small batches Just In Time short setup times short cycle times supply chain management quality Prevention Costs Training improving materials pre maintenance Appraisal costs inspection during after product testing Internal Failure production lost by downtime rejected products rework spoilage machine breakdowns External Failure customer loss warranty recall servicing returns Controllable costs management influence change layoff paycut Uncontrollable management can t change lease contract Relevant Differential costs differ between alternatives changing Irrelevant costs that don t differ between alternatives stay same Sunk costs costs incurred in past that can t be changed Variable change in total cost in direct proportion to volume changes Fixed stay constant in total cost over wide range of activity levels Total Cost Fixed Cost Variable Cost per unit x of Units Average cost Total cost of units Marginal cost cost of making one more unit variable cost Process costing mass production of similar items paint cereal Job costing small batches custom products Activity Based Management using ABC info to make decisions
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