Planning
Identify
Identify
alternatives.
alternatives.
Select
Select alternative
alternative that
that does
does
the
the best
best job
job of
of furthering
furthering
organizations
organizations objectives.
objectives.
Develop
Develop budgets
budgets to
to guide
guide
progress
progress toward
toward the
the
selected
selected alternative.
alternative.
2-2
2-3
Controlling
The
The control
control function
function ensures
ensures
that
that plans
plans are
are being
being followed.
followed.
Feedback
Feedback in
in the
the form
form of
of performance
performance reports
reports
that
that compare
compare actual
actual results
results with
with the
the budget
budget
are
are an
an essential
essential part
part of
of the
the control
control function.
function.
2-4
Decision
Making
Begin
Implementing
Implementing
plans
plans(Directing
(Directing
and
andMotivating)
Motivating)
Measuring
Measuring
performance
performance
(Controlling)
(Controlling)
2-5
2-6
Direct Materials
Raw materials that become an integral
part of the product and that can be
conveniently traced directly to it.
Example:
Example: A
A radio
radio installed
installed in
in an
an automobile
automobile
2-7
Direct Labor
Those labor costs that can be easily
traced to individual units of product.
Example:
Example: Wages
Wages paid
paid to
to automobile
automobile assembly
assembly workers
workers
2-8
Manufacturing Overhead
Manufacturing costs that cannot be traced
directly to specific units produced.
Examples:
Examples: Indirect
Indirect materials
materials and
and indirect
indirect labor
labor
2-9
Nonmanufacturing Costs
Administrative
Costs
All executive,
organizational, and
clerical costs.
2-10
Inventory
Sale
Balance
Sheet
Income
Statement
Income
Statement
2-11
Balance Sheet
Merchandiser
Current assets
Manufacturer
Current Assets
Cash
Cash
Receivables
Receivables
Merchandise Inventory
Inventories
Raw Materials
Work in Process
Finished Goods
2-12
Balance Sheet
Merchandiser
Current assets
Manufacturer
Current Assets
Cash
Cash
Receivables
Receivables
Merchandise Inventory
Inventories
Raw Materials
Work in Process
Finished Goods
2-13
$ 14,200
234,150
$ 248,350
(12,100)
$ 236,250
2-14
Beginning
Beginning
balance
balance
Additions
Additions
to
to inventory
inventory
Ending
Ending
balance
balance
Withdrawals
Withdrawals
from
from
inventory
inventory
2-15
Balance Sheet
Inventories
Material Purchases
Raw Materials
Direct Labor
Work in
Process
Manufacturing
Overhead
Selling and
Administrative
Finished
Goods
Period Costs
Income
Statement
Expenses
Cost of
Goods
Sold
Selling and
Administrative
2-17
change
change when
when activity
activity
changes.
changes.
Total fixed costs
Total fixed costs
remain
remain unchanged
unchanged
when
when activity
activity changes.
changes.
2-18
Variable Cost
Fixed Cost
Your monthly contract fee for your cell phone is fixed for the
number of monthly minutes in your contract. The monthly
contract fee does not change based on the number of calls
you make.
Within the monthly contract allotment, the average fixed cost per
cell phone call made decreases as more calls are made.
In Total
Per Unit
Variable
Fixed
2-23
End of Chapter 2
2-24