ACC 216 Notes -- Week 2
ACC 216 Notes -- Week 2 ACC216
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This 3 page Class Notes was uploaded by Elijah Duduit on Saturday January 23, 2016. The Class Notes belongs to ACC216 at Marshall University taught by STAFF in Fall 2015. Since its upload, it has received 32 views. For similar materials see Principles of Accounting in Accounting at Marshall University.
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Date Created: 01/23/16
ACC216 Notes – Week 2 Cost classifications: -‐ Cost objects (direct, indirect costs) -‐ Manufacturing (direct material, direct labor, selling, administrative, manufacturing overhead) -‐ Financial statements (period, product) -‐ Predictions (behavior, trends) (fixed costs, variable costs, mixed costs) -‐ Decision making (differential, opportunity, sunk) **Think about salary Direct and indirect costs: -‐ Direct (can be tracked easier) -‐ Indirect (aka common) (cannot be directly tracked, must factor in when necessary) Manufacturing: -‐ Direct material -‐ Direct labor -‐ Manufacturing overhead (electric, indirect labor, depreciation, etc) -‐ Selling & administrative expenses (accounting, sales, commission) -‐ Must understand cost classification Prime & Conversion Cost: -‐ Prime (direct material + direct labor) -‐ Conversion (direct labor + manufacturing overhead) Example: DM = 69; DL = 35; MOH = 14; Selling = 29; Administration = 50 Product cost (DM + DL + MOH) = 118 Period cost (certain time frame) (selling + administration) = 79 Prime cost (DM + DL) = 104 Conversion cost (DL + MOH) = 49 Fixed & Variable Cost: -‐ Cost behavior (amount of cost under varying activities) -‐ Does cost rise or fall with activity? Cost structure: Total Cost Unit Cost Variable Cost Varies Constant Fixed Cost Constant Varies **On charts, variable cost line has linear increase with higher amount of units purchased, whereas fixed cost line stays the same regardless of amount of units purchased. Mixed cost: -‐ Mix of fixed and variable costs -‐ Fixed cost component (lowest amount to keep services running) -‐ Variable cost component (services given) Relative range: -‐ Range where Total Fixed Cost is the same -‐ Stepped fixed cost Example: You can set up one machine that produces three units for $30, two machines that produce six units for $50, or three machines that produce nine units for $65 -‐ If producing two units cost $34, how much does producing three units cost? -‐ Setting up cost for one machine is $30 which produce three units; if total cost for two units is $34, then that means it was $2/unit -‐ Cost of producing three units = $36 Mixed cost equation: -‐ Think of formulas when figuring out slop e -‐ Y = a + bx -‐ B = slope -‐ (y2 – y1/x2 – x1) **See book for charts/examples Hi-‐Lo Method: -‐ Taking slope of highest and lowest points **See book for charts/examples Least Squares Method: -‐ Lowest sum of distance between estimated line and dots -‐ Differences must be squared to cancel plus -‐minus effect Examples: b = [n(Σxy) – (Σx)(Σy)]/[n(Σx ) – (Σx) ] 2 2 a = [(Σy) – b(Σx)]/n **Σ = sum Contribution Income Statement: -‐ Separates variable expenses from fixed expenses Example: **Sold 1,000 units for $12/unit Sales 12,000 Variable Expenses Cost of goods sold 6,000 Variable selling 600 Variable admin 400 7,000 5,000 Fixed Expenses Fixed selling 2,500 Fixed admin 1,500 4,000 Profit 1,000 Costs of Quality: -‐ Incurred to prevent defects -‐ Prevention & appraisal -‐ Internal & external failure costs -‐ Quality Cost Report (for management to decide what to do)
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