An introduction to
costs terms and
inventory costing
PowerPoint to accompany:
LEARNING OBJECTIVES
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
LEARNING OBJECTIVES
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
parts
Indirect costs:
electricity
rent
property taxes.
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cost materiality
operational design.
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Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Variable costs
Fixed costs
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Total dollars
Change in proportion
with output
Unchanged in relation
to output
Unchanged in
relation to output
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Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
direct/indirect, and
variable/fixed.
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Total cost:
Unit cost:
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Unit costs that include fixed costs should always reference a given
level of output or activity.
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Period costs:
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Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Variable costing:
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Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Are fixed
manufacturing costs
inventoried?
Is there a production
volume variance?
Are classifications
between variable and
fixed costs routinely
made?
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Variable costing
Absorption costing
No
Yes
No
Yes
Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Yes
Seldom
Absorption costing
Production = sales
Equal
Equal
Lower
Higher
Higher
Lower
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Copyright 2014 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781442563377/Horngren/Cost accounting/2e
Variable costing
What are the effects on
costvolumeprofit (for a
given level of fixed costs
and a given contribution
margin per unit)?
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Driven by
unit level
of sales
Absorption costing
Driven by:
a)
unit level of sales
b)
unit level of
production
c)
chosen denominator
level
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defer maintenance.
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