File Name: cost management accounting and control hansen mowen .zip
Cornerstones of Cost Management.
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Product costing accuracy means assigning the cost of the resources consumed by a cost object to that cost object. A cost object is any item for which costs are measured and assigned, including such things as products, plants, projects, departments, and activities. An activity is a basic unit of work performed within an organization.
Examples include material handling, inspection, purchasing, billing, and maintenance. A direct cost is a cost that can be traced to a cost object. An indirect cost is a cost that cannot be traced to cost objects. Traceability is the ability to assign a cost directly to a cost object in an economically feasible way using a causal relationship. Tracing is the assignment of costs to cost objects using either an observable measure of the cost objects resource consumption or factors that allegedly capture the causal relationship.
Driver tracing is the use of drivers to trace costs to cost objects. Often, this means that costs are first traced to activities using resource drivers and then to cost objects using activity drivers. A tangible product is a good that is made by converting raw materials through the use of labor and capital inputs. A service is a task or activity performed for a customer or an activity performed by a customer using an organizations products or facilities.
Services differ from tangible products on four important dimensions: intangibility, perishability, inseparability, and heterogeneity. Intangibility means that buyers of services cannot see, feel, taste, or hear a service before it is bought. Perishability means that services cannot be stored. Inseparability means that producers of services and buyers of services must be in direct contact not true for tangible products. Heterogeneity means that there is a greater chance of variation in the performance of services than in the production of products.
Three examples of product cost definitions are value-chain, operating, and traditional definitions. The value-chain definition includes cost assignments for all value-chain activities. Operating product costs include all costs except for research and development. Traditional product costs include only production costs. Different costs are needed because they serve different managerial objectives. The three cost elements that determine the cost of making a product are direct materials, direct labor, and overhead.
The income statement for a service firm does not need a supporting cost of goods manufactured schedule. Because services cannot be stored, the cost of services pro-. Allocation is the assignment of indirect costs to cost objects based on convenience or assumed linkages.
Drivers are factors that cause changes in resource usage, activity usage, costs, and revenues. Resource drivers measure the demands placed on resources by activities and are used to assign the cost of resources to activities. Example: time used to assign the cost of supervision to individual activities. Activity drivers measure the demands placed on activities by cost objects and are used to assign the cost of activities to cost objects.
Example: number of inspection hours used to assign the cost of inspection to individual products. Direct tracing is the process of assigning costs to cost objects based on physically observable causal relationships. Driver tracing is assigning costs using drivers, which are causal factors. The driver approach relies on identification of factors that allegedly capture the causal relationship. Direct tracing relies on physical observation of the.
There are six essential differences. Activitybased cost management systems use more drivers; are tracing intensive instead of allocation intensive; use broad, flexible product cost definitions; focus on managing activities instead of managing costs; emphasize systemwide performance over individual unit performance; and use both nonfinancial and financial performance measures.
Functionalbased cost management systems emphasize only financial measures. For companies that have increased decision error costs and decreased measurement costs, a move to an activity-based cost management system is called for.
Factors that affect the decision to move to an activity-based cost management system include more powerful and cheaper computing capabilities, increased competition, more focused production by competitors, deregulation, and JIT manufacturing.
Driver tracing the miles driven is an appropriate driver for the cost of gas, oil, and wear and tear on tires, etc. Direct tracing the receipt for the lunch will be submitted for reimbursement. Direct tracing Mandy will have a receipt for the stamps and photocopying services purchased. Allocation Jed will probably add up the costs for a week or a month and divide that total by the number of jobs. If the lawns differ significantly in mowing area, he could divide by the number of hours worked direct labor hours and get a cost per labor hour.
Number of statements Pounds of laundry Number of sales orders Number of purchase orders Number of inspections also inspection hours Assembly hours Hours of care Processing hours number of returns less desirable Number of parts number of purchase orders Hours of therapy. The price needs to cover all product costs, including the costs of developing, selling, and servicing. Product mix decisions should consider all costs, and the mix that is the most profitable in the long run should be selected.
The designs should be driven by the effect they have on production, marketing, and servicing costs. Thus, the operating product cost definition is the most relevant. Research and design costs are not relevant for a price decision involving an existing product. Production, marketing, and servicing costs are relevant, however. Any special order should cover its costs which potentially include production, marketing, and servicing costs.
This is a strategic decision that involves activities and costs throughout the entire value chain. The two products that Holmes sells are playhouses and the installation of playhouses. The playhouse itself is a tangible product, and the installation is a service.
Holmes could assign the costs to production and to installation, but if the installation is a minor part of its business, it probably does not go to the trouble. The opportunity cost of the installation process is the loss of the playhouses that could have been built by the two workmen who were pulled off the production line. Direct materials Direct labor Overhead Total product cost.
Direct materials Direct labor Total prime cost. Beginning inventory, January 1 Purchases 1, Ending inventory, January 31 Calendars given out 2.
Add: Purchases Materials available Less: Ending inventory Direct materials used Direct labor Manufacturing overhead Total manufacturing costs added Add: Beginning work in process Total manufacturing costs Less: Ending work in process Cost of goods manufactured Add: Cost of goods manufactured Cost of goods available for sale Less: Ending finished goods inventory Cost of goods sold Asher, Inc.
Gross margin Since there are no beginning or ending work-in-process inventories, the unit cost multiplied by the units produced gives the cost of goods manufactured. Since there are no beginning or ending finished goods, the cost of goods sold is the same as the cost of goods manufactured.
A supplemental schedule is not necessary. A cost of goods sold calculation is now necessary shown as part of the income statement below. Radwin, Inc. This occurred because 50, units from the beginning finished goods inventory were assumed to be sold. Manufacturing overhead: Supplies Material handling Total overhead costs Total current manufacturing costs Beginning inventory, materials Add: Purchases Less: Ending inventory, materials Materials used in production. Sales revenues Cost of services sold Less operating expenses: Advertising and selling expense Income before income taxes Muffle-Man produces and sells a service replacing mufflersa task performed for a customer that uses mufflers as direct materials.
Remington produces and sells a tangible product mufflers. Services differ from tangible products on four dimensions: intangibility, perishability, inseparability, and heterogeneity. Intangibility means that buyers of services cannot see, feel, hear, or taste, a service before it is bought. Perishability means that services cannot be stored for future use by a consumer. Inseparability means that producers of services and buyers of services must usually be in direct contact for an exchange to take place.
Don R. He has an undergraduate degree in mathematics from Brigham Young University. He received his Ph. His outside interests include family, church activities, reading, movies, and watching sports. Maryanne M. She currently teaches online classes in cost and management accounting for Oklahoma State University. She received her Ph.
Report Download. Manufacturing Firms versus Service FirmsManufacturing involves joining together direct materials, direct labor, and overhead to produce a new product. The product is tangible and can be inventoried. A service is intangible. It cannot be separated from the customer and cannot be inventoried. Managers must be able to track the costs of services rendered just as precisely as they must track the costs of goods manufactured. Manufacturing Firms versus Service FirmsUnique versus Standardized Products and ServicesFirms that produce unique products in small batches that incur different product costs must track the costs of each product or batch separately.
Product costing accuracy means assigning the cost of the resources consumed by a cost object to that cost object. A cost object is any item for which costs are measured and assigned, including such things as products, plants, projects, departments, and activities. An activity is a basic unit of work performed within an organization. Examples include material handling, inspection, purchasing, billing, and maintenance. A direct cost is a cost that can be traced to a cost object. An indirect cost is a cost that cannot be traced to cost objects.
Don R. He has an undergraduate degree in mathematics from Brigham Young University. He received his Ph. He has served on the editorial board of The Accounting Review.
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Cost And Management Accounting Problems And Solutions Pdf Our solutions help attract and retain occupants with advanced marketing and online services, for example. Quickly address all problems and unforeseen events. Bloomberg Businessweek helps global leaders stay ahead with insights and in-depth analysis on the people, companies, events, and trends shaping today's complex, global economy.
No eBook available Amazon. Emphasizing this point stresses the dynamic and exciting nature of the field. By taking a systems approach -- one that first covers functional-based cost and control and then activity-based cost systems -- students understand how to understand and manage any cost management system. Important Notice: Media content referenced within the product description or the product text may not be available in the ebook version. Don R. He has an undergraduate degree in mathematics from Brigham Young University.
Cost Management : Accounting and Control. Hansen , Mowen. Introduce your students to the dynamic, exciting nature of cost management as this edition demonstrates how today's conditions consistently require change in cost management systems. This edition's expansive coverage and consistent attention to technical detail provides a thorough, well-researched foundation for learning. It addresses the most recent influential topics and emerging processes affecting the discipline, including a new chapter on lean accounting and a focus on technology tools that positively impact internal costing practices.
Hansen/Mowen/Guan's COST MANAGEMENT: ACCOUNTING AND CONTROL, Sixth Edition, first covers functional-based cost and control and then.
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