Full costs and their uses

Full costs and their usesCASE: LIPMAN BOTTLE COMPANY OUTLINE

COST CONCEPTSPRODUCT COSTING SYTEMSUSES OF FULL COSTSCASE: LIPMAN BOTTLE CO.Cost is a measurement, in monetary terms, of the amount of resources used for some purposeIMPORTANT IDEAS Cost measures the use of resources. Cost measurements are expressed in monetary terms. Cost measurement always relates to a purpose.Cost object The technical name for the product, project, organizational unit, or other activity or purpose for which costs are measure.Full cost All the resources used for a cost object.The full cost of a cost object is the sum of its direct costs plus a fair share of applicable indirect costs.Items of costDirect Cost The direct costs of a cost object are items of costs that are specifically traced to,or caused by, that cost object.Indirect Cost Indirect costs are elements of costs that are associated with, or caused by, two or more cost objects jointly but that are not directly traced to each of them individuallyElements of product cost

DEFINITION OF TERMS

Direct Labor Cost - The labor quantities that can be specifically identified with a cost object in an economically feasible manner, priced at a unit price of direct laborOverhead cost - All indirect production costsall production costs other than direct costsDirect material cost - The quantities of material that can be specifically identified with a cost object in an economically feasible manner, priced at the unit price of direct materialConversion cost - The sum of direct labor cost and overhead cost Full production cost - The sum of direct material cost and conversion cost Nonproduction costs - also called period costs all costs incurred in an organization other than inventory costs eg. Selling, general and administrative cost.Full Cost - product is simply the sum of all the cost elements PRODUCT COSTING SYSTEMSThe system that accumulates and reports costs of product cost objects.ACCOUNT FLOWCHART - helpful in understanding the flow of costs through a cost accounting systemACQUISITIONPRODUCTIONSALE

USES OF FULL COST FINANCIAL REPORTINGANALYSIS OF PROFITABILITYANSWERING THE QUESTION WHAT DID IT COST?SETTING REGULATED PRICESPRODUCT PRICINGNORMAL PRICING TIME AND MATERIAL PRICINGCONTRIBUTION PRICING

CASE: LIPMAN BOTTLE COMPANY