Price And Cost Management

Price And Cost Management

1. Cost Accounting:

   • Determines costs snd best costin system.
   • Calculation of inventory value and cost of goods
   • Cost Structure
     • Direct Material: Parts or ingredients used ina product.
     • Direct Labor: Amount of work measured in hours used in production
     • Manufacturing Overhead: Inderect cots of a product

2. Production Flow Chart

   • Three main inventories
     • Materials
     • Work in process
       • Formulas
         • Prime cost: DM+DL
         • conversion Cost: DL+ MOH
     • Finished Goods

3. Predetermine Overhead Rate (POHR)

   • Rate used in in allocation rate, implemented to products and services in MOH. Implemented in WIP inventory.
     • Base to set prices
     • Allocation Bases
       • Machine Hours
       • Direct Labor Hours
     • Formula
     • ABC method
       • Calculates spesific POHR per activity; it allows more accurate and fair costing
         • Its the same, but you have to do it with all the allocation basas, each one with its own POHR
           • Allocation Bases
             • Mantainance
             • Engeneering support
             • Materials Handling
             • Set Ups
             • Recieving
             • Paying Suppliers
             • Purchasing

4. Job Costing

   • Job costing allows normal cost accumulation per-job or order. Each job has different cost
     • Used for production of unique, high-cost items.
     • Built in orders rather than mass production
     • Costs directly traced to each job
   • Four differenttyper of operations
     • Batch -production operations
       • Multiple products in batches of relatively small quantity.
     • Typical job-order cost application
       • Special-order printing and building construction.
     • Job-shop operations
       • Products manufactured in very low volumes or once at a time.
     • Service industry
       • Law firms, hospitals, etc.

5. Process Costing

   • The cost accumulation is the same for all the products. Identical cost.
     • Used for mass production.
       • Mass production: Products are all th same, identical cost
     • Equivalent Units applied to beggining inventory or ending inventory
       • Allows iincomplete units to be presented in their equivalence as finished units.
   • All process/departments have a WIP Account-, cost is accumulated for process or department.

6. Standard Costing

   • Estimated cost, comes from the performance of an operation or the production of a good or service. It is under normal conditions.
   • It´s the target cost.
     • The results are compared with actual information to nootice the differences in price .
   • It is based on engeneering and technical rates for variable and fic¿xed elements.
   • It can be diveded in many elements to calculate the variations in prices
     • DM rates
       • DM $ variance
         • (SP vs AP) AQ purchased)
       • DM Q variance
         • (SQ vs AQ)SP
     • DL rates
       • DL $ variance
         • (SP vs AP) AQ hrs used
       • DL Q variance
         • (SQ vs AQ hrs used) SP
     • MOH rates
       • VOH $ variance
         • (SP vs AP) AQ hrs used
       • VOH Q variance
         • (SQ vs AQ hrs used) SP
       • OH volume variance
         • Budget FOH vs Standard FOH
       • FOH budget variance
         • Budget FOH vs Actual FOH incurred

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