Manufacturing Cost Terms

1. Manufacturing Cost Terms

2. MATCH TERM & DEFINITIONS The return that could not be realized from the best forgone alternative use of a resource Cost Opportunity Cost A cost charged against revenue Costs not directly related to a cost object Expense Cost Object Any item for which a manager wants to measure a cost Direct Cost Costs directly related to a cost object Indirect Cost A sacrifice of resources

3. THEDEFERENCE of COST and EXPENSE Cost (Harga Pokok) Semua biaya yang telah dikeluarkan dan dianggap masih akan memberimanfaat (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

4. 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

5. ASSET EXPENSE Payroll Check EXPENSE COST

6. 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.

7. KARAKTERISTIK OPERASI PERUSAHAAN MANUFAKTUR Gudang Barang Pembelian Gudang bahan baku Statemen laba-rugi Barang jadi Kos barang terjual Penjualan Biaya penjualan Bagian Penjualan Biaya administratif Laporan kos produksi Pabrik Bagian Administratif/Umum Kos barang manufakturan

8. 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:

9. K a s Mesin Bahan baku Produk Utang Tenaga kerja kos kos Aliran fisik Konsep kos sebagai bahan olah akuntansi Penyimbolan elemen Pengukuran elemen untuk data dasar kos kos kos kos Sistem informasi Rp750.000 Rp3.500.000 Rp1.500.000 Rp7.500.000 Rp2.500.000 Rp1.750.000

10. KLASIFIKASIUMUMBIAYA BIAYA PRODUKSI: BB (langsung-tidaklangsung) BTK (langsung-tidaklangsung) BOP BIAYA NON PRODUKSI: Biaya pemasaran atau penjualan Biaya administrasi

11. KOMPONEN KOS PRODUK Overhead Material (bahan baku) Tenaga kerja langsung

12. DirectMaterials DirectLabor ManufacturingOverhead The Product

13. 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 automobile

14. DIRECT LABOR Those labor costs that can be easily traced to individual units of product. Example:Wages paid to automobile assembly workers

15. 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. MANUFACTURING OVERHEAD Manufacturing costs that cannot be traced directly to specific units produced. Examples:Indirect labor and indirect materials

16. The cost of materials that are an integral part of the product. Direct Materials The cost of labor directly involved in converting material into the product. Product Costs Direct Labor Manufacturing costs other than direct materials and direct labor. Factory Overhead

17. MATERIALS RAW MATERIALS Basic materials used in manufacturing DIRECT MATERIALS Raw materials that can be physically and directly associated with the finished product

18. MATERIALS • 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

19. LABOR DIRECT LABOR Work 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

20. MANUFACTURING OVERHEAD • Costs that are indirectly associated with manufacturing the product • Includes all manufacturing costs exceptdirect materials and direct labor

21. PrimeCost ConversionCost MANUFACTURINGCOSTS are oftenclassified as follows: DirectMaterial DirectLabor ManufacturingOverhead

22. PRIME COSTS Direct Materials Prime Costs Direct Labor + =

23. PRIME COSTS What are the prime costs for Bicycles by the Sea? Direct materials used $200,000 + Direct labor 105,500 = $305,000

24. CONVERSION COSTS Manufacturing Overhead Direct Labor Conversion Costs + = Other Indirect Materials Indirect Labor

25. CONVERSION COSTS What are the conversion costs for Bicycles by the Sea? Direct labor $105,500 + Indirect manufacturing costs 194,500 = $300,000

26. NONMANUFACTURING COSTS Marketing and selling costs . . . • Costs necessary to get the order and deliver the product. Administrative costs . . . • All executive, organizational, and clerical costs.

27. 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.

28. 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 Expense Cost of Good Sold Sale BalanceSheet IncomeStatement IncomeStatement PRODUCT COSTS Versus PERIOD COSTS

29. PRODUCT COSTS • What are product costs? • They are the costs to produce (or purchase) tangible products intended for sale.

30. PRODUCT COSTS • There are two types of product costs: Full product costs Inventoriable product costs

31. External Reporting Inventoriable product costs Period costs

32. 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.

33. INVENTORIABLE PRODUCT COSTS • 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.

34. INVENTORIABLE PRODUCT COSTS Direct Materials Direct Labor Indirect Labor Indirect Materials Other Manufacturing Overhead

35. INVENTORIABLE PRODUCT COSTS Direct Materials Direct Labor Prime Costs = Direct Materials + Direct Labor

36. INVENTORIABLE PRODUCT COSTS Direct Labor Indirect Labor Indirect Materials Other Conversion Costs = Direct Labor + Manufacturing Overhead

37. 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

38. 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

39. EXAMPLES OF PERIOD COSTS SELLING EXPENSES • Advertising expenses • Sales salaries expenses • Commission expenses

40. EXAMPLES OF PERIOD COSTS ADMINISTATIVE EXPENSES • Office salaries expenses • Office supplies expenses • Depreciation expense— office buildings and office equipment

41. LO 4 Distinguish between product costs and period costs.

42. 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.

43. Review Question 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

44. 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 DM DM DL MO MO DM DM MO

45. 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 Product Period Period Period Product Product

46. COST OBJECTS • Cost objects are anything for which a separate measurement of costs is desired. • Cost drivers are any factors that affect cost.

47. COST OBJECTS • What are examples of cost objects? • individual products • alternative marketing strategies • geographic segments of the business • departments

48. MATERIALS STOREROOM PRINTING PLANT INK INK Job 73 Materials Inventory Work in Process Inventory Flow of Manufacturing Costs • Direct Labor • Factory Overhead

49. CAMPUSBOOKSTORE Cost of Goods Sold Flow of Manufacturing Costs WAREHOUSE Job 69 Job 70 Finished Goods Inventory

50. DM Flow of Manufacturing Costs Materials Work in Process Finished Goods DM Materials Purchased Cost of Goods Sold Factory Overhead Wages Payable Total Wages DM Direct materials used in production