An Introduction To Managerial Accounting Essay

Gabe's Auto produces and sells an auto part for $30.00 per unit. In 2010, 100,000 parts were

Some of the operating expenses incurred would be selling, general, and administrative; also research, development, and engineering. They are treated as period costs because as they are accrued or incurred, they are allocated for a designated period an labeled as period costs. Two common examples of period costs are Marketing/Selling and Administrative. Such costs usually occur either after the manufacturing stage or outside the factory.

1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

“Companies can choose to use the accounting job order costing method when they have a single product line or numerous products to manufacture. However, it is less costly and less time-consuming if they elect to use process costing when calculating the manufacturing of a single product line. With similarities

Glaser Health Products manufactures medical items for the health care industry. Production involves machining, assembly and painting. Finished units are then packed and shipped. The financial controller is interested to introduce an activity-based costing (ABC) system to allocate (or distribute) indirect costs to products. Indirect costs, as distinct from direct costs, cannot be unambiguously linked to specific products. The controller would like to calculate product costs based on ABC for planning and control, not inventory valuation.

Manufacturing companies have categories for their expenses and will sort those particular line items respectively within their financial statements. Boston Beer Company has a consolidated income statement where this occurs. Fixed cost are costs that remain unchanged even as the volume of production grows whereas variable costs do exhibit variance directly proportional with the change in volume. Outlined on the company’s income statement, the operating expenses are duly noted as advertising, promotional and selling expenses, general and administrative expenses, and net of impairment of assets. Each of these specific expenses are either fixed or variable in nature.

Indicate whether each of the following should be considered a product cost or a period cost. If you identify the item as a product cost, also indicate whether it is a direct or an indirect cost. For example, the answer to item is “indirect product cost”. Begin

Period cost are cost related to selling and administrative expenses. Product cost are costs related to manufacturing of goods. Classifying period cost as product cost will decrease the expenses, thus increase the operating income.

There is a corporate unallocated Other Income and Deductions (“OI&D”) account that includes charges that pertain to the different product lines.

Property, Plant & Equipment (PPE) (AASB 116): “Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item including borrowing costs that are related to the

Businesses – from manufacturing, merchandising and service industries alike – take careful considerations for their costing systems. Setting-up competitive prices in the market can be a result of proper costing methods. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods Zauner Ornaments are currently using and upon conclusion, it will enable us to distinguish the advantages and disadvantages of each costing method.

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.

INTRODUCTION Businesses – from manufacturing, merchandising and service industries alike – take careful consideration in the analysis of their costing systems in order to be able to set up competitive prices in the market. Misallocation of costs may lead to incorrect price estimates, continuous production of unprofitable products, and ineffective processing schedules. In this case study, we will discuss the costing methods which Zauner Ornaments have used or is currently using and, in conclusion, be able to distinguish the advantages and disadvantages of each costing method. CASE CONTEXT The case seeks to assist Zauner’s comptroller, Yu Chia-yi, in determining the best costing method for their overhead costs. In addition we also aim to

Product costing refers to the process of assigning shared direct and indirect costs to individual products, customers, branches or other cost items. (USAID, 2007) Product costing is also referred to as assigning costs to inventory and production based on the expenses that go into producing or buying inventory. It is an important process for manufacturers that helps improves management information on products and helps managers and the board members to take key decisions about product design, delivery mechanisms, and especially pricing. (Lacoma, 2013)