MATCH TERM & DEFINITIONS
Cost
Expense
Cost Object
Direct Cost
Opportunity Cost
Indirect Cost
The return that could not be realized from the best forgone alternative use of a resource
A cost charged against revenue
Costs not directly related to a cost object
Any item for which a manager wants to measure a cost
Costs directly related to a cost object
A sacrifice of resources
THE DEFERENCE of COST and EXPENSE
Cost (Harga Pokok) Semua biaya yang telah dikeluarkan dan dianggap masih akan memberi manfaat (benefit) di masa yang akan datang dicatat dalam neraca
Expense (Biaya) Semua biaya yang telah dikeluarkan untuk menghasilkan prestasi dan dianggap tidak akan memberikan manfaat (benefit) di masa yang akan datang dicatat dalam perkiraan rugi laba
EXPENDITURES, COSTS & EXPENSES
• Expenditure – company purchases raw materials for $100
• Cost – company reports $100 of raw materials on balance sheet
• Expense – company records $100 expense on income statement when it sells the product that uses the raw material
Quick Check
Which of the following transactions would immediately result in an expense? (There may be more than one correct answer.)A. Work in process is completed.B. Finished goods are sold.C. Raw materials are placed into production.D. Administrative salaries are accrued and paid.
KARAKTERISTIK OPERASI PERUSAHAAN MANUFAKTUR
Gudang Barang
Bagian Penjualan
Bagian Administratif/Umum
Kos barang terjual
Statemen laba-rugi
PenjualanBiaya penjualan
Biaya administratif
Pembelian
Pabrik
Gudangbahan baku
Barang jadi
Laporan kos produksi
Kos barangmanufakturan
MANUFACTURING COSTS
Manufacturing consists of activities to convert raw materials into finished goods.
In contrast, a merchandising firm sells goods in the form in which they were bought.
Categories of manufacturing costs include:
kos
kos
Aliran fisik
Bahan bakuMesin
Tenaga kerja
K a s
Utang Produk
Penyimbolan elemen
koskos
kos
kos
Pengukuran elemenuntuk data dasar
Sistem informasi
Rp1.500.000Rp750.000
Rp2.500.000Rp3.500.000 Rp7.500.000
Rp1.750.000
Konsep kos sebagai bahan olah akuntansi
KLASIFIKASI UMUM BIAYA
BIAYA PRODUKSI: BB (langsung-tidaklangsung)BTK (langsung-tidaklangsung)BOP
BIAYA NON PRODUKSI: Biaya pemasaran atau penjualanBiaya administrasi
The ProductThe Product
DirectMaterialsDirect
MaterialsDirectLaborDirectLabor
ManufacturingOverhead
ManufacturingOverhead
DIRECT MATERIALS
Those materials that become an integral part of the product and that can be conveniently traced
directly to it.
Example: A radio installed in an automobileExample: A radio installed in an automobile
DIRECT LABOR
Those labor costs that can be easily traced to individual units of
product.
Example: Wages paid to automobile assembly workersExample: Wages paid to automobile assembly workers
Manufacturing costs that cannot be traced directly to specific units produced.
MANUFACTURING OVERHEAD
Examples: Indirect labor and indirect materialsExamples: Indirect labor and indirect materials
Wages paid to employees who are not directly
involved in production work.
Examples: maintenance workers, janitors and
security guards.
Materials used to support the production process.
Examples: lubricants and cleaning supplies used in the automobile assembly plant.
FactoryFactoryOverheadOverheadFactoryFactory
OverheadOverhead
DirectMaterials
DirectMaterials
DirectDirectLaborLaborDirectDirectLaborLabor
ProductProductCostsCosts
ProductProductCostsCosts
The cost of materials that are an integral part of the product.The cost of labor directly involved in converting material into the product.Manufacturing costs other than direct materials and direct labor.
MATERIALS
RAW MATERIALSBasic materials used in
manufacturing
DIRECT MATERIALS Raw materials that can be
physically and directly associated with the finished product
INDIRECT MATERIALS
Raw materials that cannot be easily associated with the finished product
Not physically part of the finished product or they are an insignificant part of finished product in terms of cost
Considered part of manufacturing overhead
MATERIALS
LABOR
DIRECT LABORWork of factory employees that can
be physically and directly associated with converting raw materials into finished goods
INDIRECT LABOR Work of factory employees that has
no physical association with the finished product or for which it is impractical to trace to the goods produced
MANUFACTURING OVERHEAD
Costs that are indirectly associated with manufacturing the product
Includes all manufacturing costs except direct materials and direct labor
DirectMaterialDirectMaterial
DirectLaborDirectLabor
ManufacturingOverhead
ManufacturingOverhead
PrimeCost
ConversionCost
MANUFACTURING COSTS are oftenclassified as follows:
What are the prime costs for Bicycles by the Sea?
Direct materials used $200,000+ Direct labor 105,500= $305,000
PRIME COSTS
CONVERSION COSTS
DirectLabor
ManufacturingOverhead+ =
ConversionCosts
IndirectLabor
IndirectMaterials Other
What are the conversion costs forBicycles by the Sea?
Direct labor $105,500+ Indirect manufacturing costs 194,500= $300,000
CONVERSION COSTS
NONMANUFACTURING COSTS
Marketing and selling costs . . .–Costs necessary to get the order and deliver the product.
Administrative costs . . .–All executive, organizational, and clerical costs.
Quick Check
Which of the following costs would be considered manufacturing overhead at Boeing? (More than one answer may be correct.)A. Depreciation on factory forklift trucks.B. Sales commissions.C. The cost of a flight recorder in a Boeing 767.D. The wages of a production shift supervisor.
PRODUCT COSTS Versus PERIOD COSTS
Product costs include direct
materials, direct labor, and
manufacturing overhead.
Period costs are not included in product costs.
They are expensed on the
income statement.
Inventory Cost of Good Sold
BalanceSheet
IncomeStatement
Sale
Expense
IncomeStatement
PRODUCT COSTS
• What are product costs?–They are the costs to produce (or purchase) tangible products intended for sale.
Inventoriableproduct
costs
Inventoriableproduct
costs
Fullproduct
costs
Fullproduct
costs
• There are two types of product costs:
PRODUCT COSTS
INVENTORIABLE PRODUCT COSTS
• For external reporting, merchandisers’ inventoriable product costs include only costs that are incurred in the purchase of goods.
• Inventoriable costs are an asset.• Period costs flow as expenses
directly to the income statement.
• For external reporting, manufacturers’ inventoriable product costs include raw materials plus all other costs incurred in the manufacturing process.
• Inventoriable product costs are incurred only in the third element of the value chain.
• Costs incurred in other elements of the value chain are period costs.
INVENTORIABLE PRODUCT COSTS
DirectMaterials
DirectLabor
IndirectLabor
IndirectMaterials
Other
Manufacturing Overhead
INVENTORIABLE PRODUCT COSTS
DirectMaterials
DirectLabor
Prime Costs = Direct Materials + Direct Labor
INVENTORIABLE PRODUCT COSTS
Conversion Costs = Direct Labor + Manufacturing Overhead
DirectLabor
IndirectLabor
IndirectMaterials
Other
INVENTORIABLE PRODUCT COSTS
The costs of converting the materials into finished
products consists of direct labor and factory overhead. These two costs combined
are often referred to as conversion costs
The costs of converting the materials into finished
products consists of direct labor and factory overhead. These two costs combined
are often referred to as conversion costs
PERIOD COSTS
Matched with revenue of a specific time period and charged to expense as incurred
Non-manufacturing costs
Deducted from revenues in period incurred to determine net income
Includes all selling and administrative expenses
EXAMPLES OF PERIOD COSTSEXAMPLES OF PERIOD COSTSEXAMPLES OF PERIOD COSTSEXAMPLES OF PERIOD COSTS
SELLING EXPENSES
Advertising expenses
Sales salaries expenses
Commission expenses
EXAMPLES OF PERIOD COSTSEXAMPLES OF PERIOD COSTSEXAMPLES OF PERIOD COSTSEXAMPLES OF PERIOD COSTS
ADMINISTATIVE EXPENSES Office salaries
expenses
Office supplies expenses
Depreciation expense— office buildings and office equipment
LO 4 Distinguish between product costs and LO 4 Distinguish between product costs and
period costsperiod costs..
Quick Check
Which of the following costs would be considered a period rather than a product cost in a manufacturing company?A. Manufacturing equipment depreciation.B. Property taxes on corporate headquarters.C. Direct materials costs.D. Electrical costs to light the production facility.
Direct Materials are a:
Product Manufacturing Period Cost Overhead Cost
a. Yes Yes No
b. Yes No No
c. Yes Yes Yes
d. No No No
Review Question
Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials, direct labor, or manufacturing overhead.
______ a. Windshield______ b. Engine______ c. Wages of assembly line worker______ d. Depreciation of factory machinery______ e. Factory machinery lubricants______ f. Tires______ g. Steering wheel______ h. Salary of painting supervisor
DMDMDLMOMODMDMMO
Identify whether each of the following costs should be classified as product costs or period costs.
____________ a. Manufacturing overhead____________ b. Selling expenses____________ c. Administrative expenses____________ d. Advertising expense____________ e. Direct labor____________ f. Direct material
ProductPeriodPeriodPeriod
ProductProduct
COST OBJECTS
• Cost objects are anything for which a separate measurement of costs is desired.
• Cost drivers are any factors that affect cost.
• What are examples of cost objects?– individual products–alternative marketing strategies
–geographic segments of the business
–departments
COST OBJECTS
Flow of Manufacturing Flow of Manufacturing CostsCosts
Flow of Manufacturing Flow of Manufacturing CostsCosts
PRINTING PLANTPRINTING PLANT
Job 73
Work in Process Inventory
•Direct Labor•Factory Overhead
MATERIALS STOREROOMMATERIALS STOREROOM
INK INK
Materials Inventory
Flow of Manufacturing Flow of Manufacturing CostsCosts
Flow of Manufacturing Flow of Manufacturing CostsCosts
CAMPUSCAMPUS BOOKSTOREBOOKSTORE
Cost of Goods Sold
Finished Goods Inventory
WAREHOUSEWAREHOUSE
Job 69
Job 70
Flow of Manufacturing CostsFlow of Manufacturing Costs
DMDM
Materials Work in Process Finished Goods
Wages Payable Factory Overhead
Cost of Goods Sold
DMDMMaterialsPurchased
TotalWages
Direct materials used in productionDMDM
DMDM
Materials Work in Process Finished Goods
Wages Payable Factory Overhead
Cost of Goods Sold
IMIM
DMDMMaterialsPurchased
TotalWages
Indirect materials used in productionIMIM
Flow of Manufacturing CostsFlow of Manufacturing Costs
IMIM
DMDM
Materials Work in Process Finished Goods
Wages Payable
DLDL
Factory Overhead
Cost of Goods Sold
IMIM
DMDMMaterialsPurchased
TotalWages
Direct labor used in productionDLDL
Flow of Manufacturing CostsFlow of Manufacturing Costs
IMIM
DLDL
DMDM
Materials Work in Process Finished Goods
Wages Payable
DLDL
Factory Overhead
Cost of Goods Sold
IMIM
ILIL
DMDM
IMIM
DLDL
ILIL
MaterialsPurchased
TotalWages
Indirect labor used in productionILIL
Flow of Manufacturing CostsFlow of Manufacturing Costs
DMDM
Materials Work in Process Finished Goods
Wages Payable
DLDL
Factory Overhead
Cost of Goods Sold
IMIM
ILIL
DMDM
IMIM
DLDL
ILIL
MaterialsPurchased
TotalWages
Other factory overhead costs incurred during production
OFOHOFOH
Flow of Manufacturing CostsFlow of Manufacturing Costs
OFOHOFOH
DMDM
Materials Work in Process Finished Goods
Wages Payable
DLDL
Factory Overhead
Cost of Goods Sold
IMIM
ILIL
DMDM
IMIM
DLDL
ILIL
OFOHOFOH
MaterialsPurchased
TotalWages
Based on predetermined overhead rate
FOHAFOHA
Factory overhead applied to work in processFOHAFOHA
Flow of Manufacturing CostsFlow of Manufacturing Costs
FOHAFOHA
DMDM
Materials Work in Process Finished Goods
Wages Payable
DLDL
Factory Overhead
Cost of Goods Sold
IMIM
ILIL
DMDM
IMIM
DLDL
FOHAFOHA
ILIL
OFOHOFOH
COGMCOGMCOGMCOGMMaterialsPurchased
TotalWages
FOHAFOHA
Cost of goods manufactured and transferred to finished goods
COGMCOGM
Flow of Manufacturing CostsFlow of Manufacturing Costs
DMDM
Materials Work in Process Finished Goods
Wages Payable
DLDL
Factory Overhead
Cost of Goods Sold
IMIM
ILIL
DMDM
IMIM
DLDL
FOHAFOHA
ILIL
OFOHOFOH
SOLDSOLDMaterialsPurchased
TotalWages
FOHAFOHA
Finished goods soldSOLDSOLD
COGMCOGMCOGMCOGM
Flow of Manufacturing CostsFlow of Manufacturing Costs
SOLDSOLD
FLOW of COSTS THROUGH a MANUFACTURER’S ACCOUNTS
• Direct Materials Inventory• Beginning inventory+Purchases and freight-in
=Direct materials availablefor use
– Ending inventory=Direct materials used
• Work in Process Inventory• Beginning inventory+Direct materials used+Direct labor+Manufacturing overhead=Total manufacturing costs
to account for– Ending inventory=Cost of goods
manufactured
• Finished Goods Inventory• Beginning inventory+Cost of goods manufactured=Cost of goods available for sale– Ending inventory=Cost of goods sold
FLOW of COSTS THROUGH a MANUFACTURER’S ACCOUNTS
DIFFERENTIAL COSTS and REVENUES
Costs and revenues that differ among alternatives.
Example: You have a job paying $1,500 per month in your hometown. You have a job offer in a neighboring city that pays $2,000 per month. The commuting cost to the city is $300 per month.
Example: You have a job paying $1,500 per month in your hometown. You have a job offer in a neighboring city that pays $2,000 per month. The commuting cost to the city is $300 per month.
Differential revenue is: $2,000 – $1,500 = $500
Differential cost is: $300
Quick Check
Suppose you are trying to decide whether to drive or take the train to Portland to attend a concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the cost of the pizza you ate last night relevant in this decision? In other words, should the cost of the pizza affect the decision of whether you drive or take the train to Portland?A. Yes, the cost of the pizza is relevant.B. No, the cost of the pizza is not relevant.
Quick Check
Suppose you are trying to decide whether to drive or take the train to Portland to attend a concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the cost of the train ticket relevant in this decision? In other words, should the cost of the train ticket affect the decision of whether you drive or take the train to Portland?A. Yes, the cost of the train ticket is relevant.B. No, the cost of the train ticket is not relevant.
NOTE
• Every decision involves a choice from among at least two alternatives.
• Only those costs and benefits that differ between alternatives (i.e., Differential costs and benefits) are relevant in a decision. All other costs and benefits can and should be ignored.
Quick Check
Suppose you are trying to decide whether to drive or take the train to Portland to attend a concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the annual cost of licensing your car relevant in this decision?A. Yes, the licensing cost is relevant.B. No, the licensing cost is not relevant.
Quick Check
Suppose you are trying to decide whether to drive or take the train to Portland to attend a concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the depreciation on your car relevant in this decision?A. Yes, the depreciation is relevant.B. No, the depreciation is not relevant.
OPPORTUNITY COSTS
The potential benefit that is given up when one alternative is selected over another.
Example: If you werenot attending college,you could be earning$15,000 per year. Your opportunity costof attending college for one year is $15,000.
SUNK COSTS Sunk costs cannot be changed by any
decision. They are not differential costs and should be ignored when making decisions
Example: You bought an automobile that cost $10,000 two years ago. The $10,000 cost is sunk because whether you drive it, park it, trade it, or sell it, you cannot change the $10,000 cost.
Quick Check
Suppose that your car could be sold now for $5,000. Is this a sunk cost?A. Yes, it is a sunk cost.B. No, it is not a sunk cost.