ACTG 2300 Lecture 2: Day 2 Notes

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Day 2 1/8
Cost Information
Hiring
o Employees cost money
o Human Resources manager
Supply chain management
o Supplier boxing, packaging, shipping, etc.
o Logistics manager
Facility management
o San Jose vs. Boise costs are different
o Operations/Facility manager
Pricing
o How much it costs to make product, how much selling it for
o Done by Product/Sales/Marketing manager
Borrowing/Financing decisions
o Interest rates
o Loans
o Treasury manager
Opening/Closing stores
o Store/Area manager
Types of Cost
Taxes
Labor
Land
Administrative
Inventory
Overhead
Food/Beverage
Utilities
Advertising
Production
Marketing
Not Important Costs
Opportunity
Sunk
Differential
Cost
Is a measurement, in monetary terms, of the consumption of resources used
for some purpose
Monetary terms
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o Always expressed in a $ number
o If asked to answer cost, must be a $
Amount of resources
o Scarce, will cost more
Purpose
o Cost depends on the purpose we have when we calculate
o Cost is calculated differently depending on the purpose
o Hard to get the TRUE cost of product
KNOW
Purpose
Principle
Typology
Scroll
Financial
Reporting
Nature
Manufacturing
Non-
Manufacturing
Box
Costing
Traceability
Direct
Indirect
Arrow
Decision-making
Behavior
Variable
Fixed
When we do Financial Reporting (outside reporting), we use a principle
called Cost Nature, meaning that we look at the cost and look at the activity
to which the cost is related, then we distinguish 2 typologies, Manufacturing
and Non-Manufacturing
Financial
Outside reporting
Traditional
Costing
To determine the cost of a product
Internal
Principle = Behavior
o Relationship between the volume and the cost
o Volume = quantity produced (units, not $)
Decision-making
Making specific decisions
o EX: drop product, buy new, resell, etc.
Margin = Income = Profit
Does not equal revenue
Income Statement Format
Top line of an income statement is ALWAYS Sales Revenues
+ Sales Revenues
- Cost of Goods Sold
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= Gross Margin
- Selling, General, Administrative Expenses
= Operating Income
+ Net Non-Operating Income (Expenses)
= Income Before Taxes
- Income Taxes (incl. investment activity)
= Net Income
COGS = beg. Inv. + purchases end. Inv.
Operating Expenses (sell goods or deliver services)
COGS
SG&A Expenses
Non-Operating Expenses
Net Non-Operating Income (Expenses) (Interest)
Income Taxes (incl. investment activity) (Taxes)
Manufacturing cost can be kept on balance sheet unless we sell the units in which
they cost
Money can be reported as a cost as soon as a contract is signed
Manufacturing Costs
Always included/reported in COGS
Non-Manufacturing Costs
Always included/reported in SG&A
Manufacturing Cost
Always treated as a product cost (cost that MAY be incurred and
expensed/reported in different periods)
EX: 3 years later I sell the units for which I used the cost today
Non-Manufacturing Cost
Always treated as period cost (cost incurred and expensed in the same
period)
Cost Nature
Manufacturing
Non-Manufacturing
Accounting Treatment
Product/Inventoriable
Period
Financial Reporting Terminology
COGS/Cost of Sales
Selling, General, & Administrative Exp
Excercise 2-3 (p. 54)
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