Mind map

Price And Cost Management

Guillermo Diez Spanish

Map content

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
Production Flow Chart
- Three main inventories
  - Materials
  - Work in process
    - Formulas
      - Prime cost: DM+DL
      - conversion Cost: DL+ MOH
  - Finished Goods
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
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.
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.
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