Slide 1 ___________________________________ 2.1 Ge ne r al Cost - PDF document

Slide 1 ___________________________________ 2.1 Ge ne r al Cost Classific ations o Costs are an unavoidable busine ss ___________________________________ tr uth o How c osts are c lassified de pe nds on ___________________________________ the type of organization o Manufac tur ing ___________________________________ o Me r c handising o Se r vic e ___________________________________ ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 2 ___________________________________ Manufac tur ing Costs o Dir e c t Mate r ials (DM) ___________________________________ o aka R aw Mate r ials o Mate r ials use d in the final pr oduc t ___________________________________ o Dir e c t L abor (DL ) o aka touc h labor o L abor that dir e c tly handle s the ___________________________________ asse mbly of the pr oduc t o Manufac tur ing Ove r he ad (MOH) o Aka fac tor y ove rhe ad, fac tor y burde n ___________________________________ o All c osts of pr oduc tion E XCE PT dir e c t mate r ials and dir ec t labor ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 3 ___________________________________ Pr ime and Conve r sion Costs E xhibit T 2M1~1 Prime and Conversion c osts ___________________________________ ___________________________________ Dir e c t Mate r ials Dir e c t L abor Manufac tur ing ___________________________________ Ove r head Prime Costs Conve rsion ___________________________________ Costs Dir e c t L abor is both a pr ime c ost and a c onve r sion c ost ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________

Slide 4 ___________________________________ Non-Manufac tur ing Costs o AKA Se lling, Ge ne r al & ___________________________________ Administr ative (SG&A) c osts o Classified into two c ate gor ies ___________________________________ o Mar ke ting or se lling c osts o R e lated c ost to se lling the pr oduc t to c ustome r fr om or de r to de live r y ___________________________________ o Administr ative c osts o All c osts assoc iate d with the day to day ___________________________________ management of the or ganization. T hose c osts inc lude exec utive, c le r ic al and or ganizational c osts. ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 5 ___________________________________ Manufac turing c osts Pr oble m De ter mine whe the r the c osts below ar e dir e c t ___________________________________ mate rials, dire c t labor , or manufac tur ing ove r he ad o L o Pr e athe r use d to ope r ty taxe s on make a le athe r the fac tor y building ___________________________________ c oat o Sec r e tar y to the o L ubr ic ation for the fac tor y manage r ___________________________________ fac tor y e quipme nt o F ibe r glass use d in o Asse mble r at a the manufac tur ing motor c yc le of a spor ts c ar ___________________________________ manufac tur ing o He althc are c osts for plant fac tor y labor ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 6 ___________________________________ Manufac tur ing c osts Answe r De ter mine whe the r the c osts below ar e dir e c t ___________________________________ mate rials, dire c t labor , or manufac tur ing ove r he ad o L o Pr e athe r use d to make ope r ty taxes on the a leather c oat DM fac tor y building ___________________________________ o L ubr ic ation for the MOH fac tor y e quipme nt o Sec r etar y to the fac tor y MOH manager MOH ___________________________________ o Asse mble r at a o F ibe r glass use d in the motor c yc le manufac tur ing of a manufac tur ing plant spor ts c ar DM ___________________________________ DL o He althc ar e c osts for fac tor y labor DL ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________

Slide 7 ___________________________________ Mor e c osts proble m De ter mine whe the r the c osts below ar e pr ime ___________________________________ c osts, or c onve r sion c osts o Denim for o Ve lc r o on te nnis manufac tur ing jeans shoe s ___________________________________ o F ac tor y seamstr ess o E lec tr ic ity for wages lighting fac tor y o F ac tor y janitor wage s ___________________________________ o F ac tor y supe r visor o F ac tor y liability who has only insur anc e administr ative ___________________________________ dutie s ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 8 ___________________________________ More c osts answe r De ter mine whe the r the c osts below ar e pr ime ___________________________________ c osts, or c onve r sion c osts o Denim for o Velc r o on te nnis manufac tur ing jeans shoe s prime (DM) ___________________________________ o E pr ime (DM) le c tr ic ity for lighting fac tor y c onver sion o F ac tor y seamstr ess (MOH) wages prime and ___________________________________ c onver sion (DL ) o F ac tor y supe r visor who has only o F ac tor y janitor wage s administr ative dutie s c onver sion (MOH) c onve r sion (MOH) ___________________________________ o F ac tor y liability insur anc e c onver sion (MOH) ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________ Slide 9 ___________________________________ And mor e c osts pr oble m Dete r mine whethe r the c osts be low ar e manufac tur ing ___________________________________ (M) or non-manufac tur ing (NM) c osts. F ur the r br eak down non-manufac tur ing into selling and mar ke ting (SM) or ge ner al and administr ative c osts (GA) ___________________________________ o Sale sman o E lec tr ic ity for lighting in c ommissions the administr ative suite o Wood use d in o Mor tgage e xpe nse ___________________________________ fur nitur e alloc ated to pr oduc t manufac tur ing showr oom spac e o Adver o De mos sent to sale sman tising on ___________________________________ the loc al r adio around the r e gion o Ove r o CE time for asse mbly O’s salary line wor ke r s ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________

Slide 10 ___________________________________ And mor e c osts pr oble m Dete r mine whethe r the c osts be low ar e manufac tur ing ___________________________________ (M) or non-manufac tur ing (NM) c osts. F ur the r br eak down non-manufac tur ing into selling and mar ke ting (SM) or ge ner al and administr ative c osts (GA) ___________________________________ o E le c tr ic ity for lighting in o Sale sman the administr ative suite c ommissions NM & SM NM & GA o Wood use d in fur nitur e o Mortgage e xpense ___________________________________ manufac tur ing M alloc ate d to pr oduc t o Advertising on the showr oom spac e NM & loc al r adio NM & SM SM o Ove r time for o Demos se nt to sale sman ___________________________________ ar ound the r e gion NM & asse mbly line wor ke r s M SM o CE O’s salar y NM & GA ___________________________________ 2005 K D Ha the wa y-Dia l ___________________________________