The document provides an overview of manufacturing cost accounting concepts and calculations including job order costing, activity based costing, standard costs, and flexible budgets. It discusses calculating product costs, contribution margin, breakeven analysis, master budget components including direct materials budget, labor variances, and flexible budget performance reports. The key information covered relates to accounting for costs in a manufacturing environment.

1. Manufacturing Cost Accounting

2. Outline
Cost Terms, Concepts, and
Classifications
Job Order Costing
Cost Behavior
Cost – Volume – Profit
Activity Based Costing
Profit Planning
Standard Costs
Flexible Budgets and Overhead

3. Product Costs - A Closer
Look
Manufacturing Work
Raw Materials Costs In Process
Beginning raw Direct materials Beginning work in
materials inventory + Direct labor process inventory
+ Raw materials + Mfg. overhead + Total manufacturing
purchased = Total manufacturing costs
= Raw materials costs = Total work in
available for use process for the
in production period
Costs associated with the goods that – Ending work in
are completed during the period are process inventory
transferred to finished goods = Cost of goods
inventory. manufactured.

4. The Contribution Format
Total Unit
Sales Revenue $ 100,000 $ 50
Less: Variable costs 60,000 30
Contribution margin $ 40,000 $ 20
Less: Fixed costs 30,000
Net income $ 10,000
The contribution margin format emphasizes cost
behavior. Contribution margin covers fixed costs
and provides for income.

5. Calculating Breakeven in
Units
Here is the information from Wind
Bicycle Co.:
Total Per Unit Percent
Sales (500 bikes) $250,000 $ 500 100%
Less: variable expenses 150,000 300 60%
Contribution margin $100,000 $ 200 40%
Less: fixed expenses 80,000
Net income $ 20,000

6. The Master Budget
Sales
Budget
Ending Selling and
Production
Inventory Administrative
Budget
Budget Budget
Direct Direct Manufacturing
Materials Labor Overhead
Budget Budget Budget
Cash
Budget
Budgeted Financial Statements

7. The Direct Materials Budget
April May June Quarter
Production 26,000 46,000 29,000 101,000
Materials per unit 5 5 5 5
Production needs 130,000 230,000 145,000 505,000
Add desired
ending inventory 23,000 14,500 11,500 11,500
Total needed 153,000 244,500 156,500 516,500
Less beginning
inventory 13,000 23,000 14,500 13,000
Materials to be
purchased 140,000 221,500 142,000 503,500

8. Labor Variances Summary
Actual Hours Actual Hours Standard Hours
× × ×
Actual Rate Standard Rate Standard Rate
1,550 hours 1,550 hours 1,500 hours
× × ×
$6.20 per hour $6.00 per hour $6.00 per hour
= $9,610 = $9,300 = $9,000
Rate variance Efficiency variance
$310 unfavorable $300 unfavorable

9. Flexible Budget
Performance Report
CheeseCo
Cost Total
Formula Fixed Flexible Actual
Per Hour Costs Budget Results Variances
Machine hours 8,000 8,000 0
Variable costs
Indirect labor $ 4.00 $ 32,000 $ 34,000 $ 2,000 U
Indirect material 3.00 24,000 25,500 1,500 U
Power 0.50 4,000 3,800 200 F
Total variable costs $ 7.50 $ 60,000 $ 63,300 $ 3,300 U
Fixed Expenses
Depreciation $ 12,000 $ 12,000 $ 12,000 0
Insurance 2,000 2,000 2,050 50 U
Total fixed costs $ 14,000 $ 14,050 50 U
Total overhead costs $ 74,000 $ 77,350 $ 3,350 U

10. Utilization of a Constrained
Resource
Let’s calculate the contribution margin
per unit of the scarce resource,
machine A1.
If there are no other considerations, the best
plan would be to produce to meet current
demand for Product 2 and then use remaining
capacity to make Product 1.