BUS 202 Lecture 2: January 25th
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Department
BUS - Business Administration
Course
BUS 202
Professor
Nick Ross
Semester
Spring

Description
January 25th Wednesday, January 25, 20179:16 AM • Cost Object: anything from which cost data is desired ○ Ex: § iPad Factory § Piece of machinery in said factory § Single iPad being manufactured by iPad factory • Cost Classification: ○ Classification #1: § Direct Vs. Indirect: □ Direct cost: ® A cost that can be easily traced to the cost object □ Indirect cost: ® A cost that cant easily be traced to a cost object □ Ex: Cost object Cost In/direct iPad Foreman's salary Indirect iPad Machine lubricant Indirect ® iPad Plastic in iPad Direct Machinery Forman's Salary Indirect Machinery Lubricant Direct Factory Forman's Salary Direct □ Direct Material (DM): ® All the directly traceable raw material used in the final good ® Ex: ◊ iPad: The plastic in the LCD screen □ Indirect Material: ® Raw materials not directly attributed to the final product ® Ex: machine lubricant is an indirect material □ Direct Labor (DL): ◊ All labor cost directly traceable to our final product ® Ex: ◊ Someone working on the factory line assembling the iPads □ Indirect labor: January 25th Wednesday, January 25, 20179:16 AM • Cost Object: anything from which cost data is desired ○ Ex: § iPad Factory § Piece of machinery in said factory § Single iPad being manufactured by iPad factory • Cost Classification: ○ Classification #1: § Direct Vs. Indirect: □ Direct cost: ® A cost that can be easily traced to the cost object □ Indirect cost: ® A cost that cant easily be traced to a cost object □ Ex: Cost object Cost In/direct iPad Foreman's salary Indirect iPad Machine lubricant Indirect ® iPad Plastic in iPad Direct Machinery Forman's Salary Indirect Machinery Lubricant Direct Factory Forman's Salary Direct □ Direct Material (DM): ® All the directly traceable raw material used in the final good ® Ex: ◊ iPad: The plastic in the LCD screen □ Indirect Material: ® Raw materials not directly attributed to the final product ® Ex: machine lubricant is an indirect material □ Direct Labor (DL): ◊ All labor cost directly traceable to our final product ® Ex: ◊ Someone working on the factory line assembling the iPads □ Indirect labor: ® Ex: machine lubricant is an indirect material □ Direct Labor (DL): ◊ All labor cost directly traceable to our final product ® Ex: ◊ Someone working on the factory line assembling the iPads □ Indirect labor: ® All labor cost not directly traceable to our final product ® Ex: ◊ A janitor, security guard, people working but not directly working on the good being manufactured □ Manufacturing overhead (MOH): ® Everything that is not direct materials and direct labor □ Selling General Administration (SG&A): ® EX: ◊ CEO salary, marketing, etc. ® SG&A is separate from the manufacturing cost ◊ Anything touching the "manufacturing building" is manufacturing cost and visa versa ○ Classification #2: Product Cost (COGS): § □ Any cost associated with a product (MOH, DM, DL) § Period Cost: □ Everything else (SG&A) ○ Classification #3: § Cost behavior: □ Variable Cost: ® A cost that changes with our output □ Fixed Cost: ® A cost that doesn’t change with our output ® Ex: Rent ◊ □ Mixed Cost: ® Fixed and variable component ® Ex: ◊ $100 for camp site and + $5 per person □ ® Ex: machine lubricant is an indirect material □ Direct Labor (DL): ◊ All labor cost directly traceable to our final product ® Ex: ◊ Someone working on the factory line assembling the iPads □ Indirect labor: ® All labor cost not directly traceable to our final product ® Ex: ◊ A janitor, security guard, people working but not directly working on the good being manufactured □ Manufacturing overhead (MOH): ® Everything that is not direct materials and direct labor □ Selling General Administration (SG&A): ® EX: ◊ CEO salary, marketing, etc. ® SG&A is separate from the manufacturing cost ◊ Anything touching the "manufacturing building" is manufacturing cost and visa versa ○ Classification #2: Product Cost (COGS): § □ Any cost associated with a product (MOH, DM, DL) § Period Cost: □ Everything else (SG&A) ○ Classification #3: § Cost behavior: □ Variable Cost: ® A cost that changes with our output □ Fixed Cost: ® A cost that doesn’t chan
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