MAS - Cost Classification

Cost Function

Cost is either a Product Cost (Inventoriable) or a Period Cost (Non-Inventoriable). Depending on whether the purpose of incurring the cost was produce or sell a product.

Product Cost

Related sa pag produce ng product, kaya magiging asset/inventory muna sya.

• Inventoriable - All manufacturing costs the rest are expensed

• Balance Sheet

• COGS (I.S)

Manufacturing costs:

• Direct Materials

• Direct Labor

• Overheads (Fixed or Variable)

Period Cost

Matched in time kaya pag nagastos na, inexpensed agad.

• Expensed

• Income Statement

Expenses:

• Selling Expenses

• Admin Expenses

Product Costing Techniques:

1. Absorption costing

2. Variable costing

3. throughput Costing

Absorption costing

Product Cost - kasama lahat ng Manufacturing cost

Variable cost

Lahat ng Variable Manufacturing Cost

Throughput Costing

Lahat ng direct material

Cost Behavior

A cost is either a variable or a fixed cost depending on its relationship with the Cost Driver. As a rule, variable cost are constant per unit while fixed cost are constant in total.

Ho yung cost kung bakit nag babago yung cost.

Cost Behavior per unit in Relation to its Cost Driver:

Variable Cost

Constant Per unit, varies in total

Cost Behavior Per Unit in Relation to its Cost Driver:

Fixed Costs

Constant in total, Varies Par unit; No changes in its total

why varies per unit? kasi yung fixed maallocate sa total unit produced

Cost Control Liability

Cost is either a controllable cost (Discretionary) or non-controllable (committed) depending on whether management has the discretion or option to incur the cost or not.

A cost maybe controllable or not depending on the person who is responsible

Cost Relevance

Cost is either a differential or a sunk cost depending on whether the cost will be affected by a decision or not.

Two (2) types of Cost relevance

1. Relevant cost

2. Irrelevant cost

Relevant cost and its Two types of changes

it affect decisions, it has changes

Types of changes

Incremental

• Pag tumaas yung cost

Avoidable/discremental

• Nabawasan yung cost

Irrelevant Cost and its Two types

• No changes. Doesn't affect decisions

• Useful for decision making

Two Types

Sunk Cost

• Yung mga nagastos mo dati (past cost) Dapat hindi na sinama sa decision.

Committed cost on Future cost

Magagastos mo Palang pero hindi mababago kasi magagastos mo padin yan.

Cost as to quality

Cost is either a conformance or non-conformance costs. Conformance Cost is either a preventive or Appraisal cost white Non-Conformance (Failure) cost is either Internal or External

Cost na ginastos mo para maging Quality product mo

Two types of conformance Cost

1. Prevention Cost

Unang Cost na ginastos mo para in the first place Quality na yung product mo

2. Appraisal cost

Ito yung mga ginastos mo para test Kong okay ba talaga mga product mo, Para masigurado mo na bago matapos alam mo na okay products mo.

Non-conformance cost

Hindi nag conform yung na produce mong product Sa Blueprint, kaya gumastos Ka ng cost para bumalik Sa dating Quality yung product mo.

may ngyaring defects kaya aayusin para mag conform

Two types of non-conformance cost

1. Internal failure costs

Mga Ginastos mo para mag conform ulit yung products mo sa original na Blueprint nya. Pero hindi mo pa nalbibigay sa customers mo yung mga product.

2. External failure cost

Ito naman is yung mga nai-deliver na sa customers mo kaya binalile sayo yung mga product

Statement of comprehensive |ncome

Direct Materials:

Beg. Raw Material

Add: Raw Material purchases

Indirect Material purchases

Raw Material Available for use

Less: Ending Raw Materials inventory

Direct Materials used in Production

Direct Labor

Manufacturing overhead

Total Manufacturing costs

Beg. - Work in Process

Total Goods Put into Process

Less: Work-in-process

Cost of Goods Manufactured

Statement of cost of Goods Sold.

Beg. - Finished Goods

Cost of Goods Manufactured

Total Goods available for Sale

(Ending - Finished Goods)

Cost of Goods Sold

why fixed and variable cost are segregated?

for Cost Prediction

High-Low Method

1. y=a+b(x)

2. b= y1-y2 / x1 - x2

cost at highest productivity level - Cost at Lowest activity level / Highest Activity level - Lowest Activity level

coefficient of Determination

computed by multiplying to itself

It also measured to determine the cost line