OLD Cost model for manufacturing: 1. Direct materials VC2. Direct labor VC (sometimes fixed)3. Manufacturing Overhead BOTH FC & VC

NEW Cost model for manufacturing:2. Direct materials VC2. Direct labor VC (sometimes fixed)- DL has gotten smaller from the old model3. MOH - Depreciation, Repairs, Supplies, etc- MOH has grown since we become more mechanized

Fixed Cost Behavior- Services provided or goods produced- Remains constant within relevant range- On per unit basis, the more produced the FC per unit gets smaller

Product v Period CostProduct includes: DM, DL, MOH (includes depreciation IND)Period includes: Selling costs, Administrative costs

Flow from Raw materials to Finished goodsPurchase Raw Materials WIP (Direct materials + labor + PMOH) / MOH (Indirect materials) Finished goods (WIP comes to this acc.)

Under-applied v Over-appliedUnder-applied- when PMOH is less than total amount of MOH during periodOver-applied when PMOH is more than total amount of MOH during period

Prime v ConversionPrime- combining direct material and direct laborConversion combining direct labor and MOH

Mixed CostsProduction volume5K units6K unitsDM$ 311K$373.2KDL171.5K205.8KMOH415K427.8K

6K$373.26K$205.86K$427.85K311.05K171.55K415.01K62.21K34.31K12.8DM VC 62.2/unitDL VC 34.3/unitMOH VC 12.8/unitTotal variable cost: 62.2 + 34.3 + 12.8 = 109.3

Job Cost Sheet EX: Pg 101 2-10Cost Detail ..Cost SummaryDM 12KDL8KMOH9.6K (8K x 1.20)Total Product Cost29.6K (12K+8K+9.6K)Unit Product Cost$148 (29.6K / 200 units)

EX: 2-121. Est MOH 1,350,000 Est driver act.150,000$9/machine hour

2. DM$350 DL230 MOH270 ($9 x 30MH) Total mfg cost: $850

3. MOHCGS 2K Actual AppliedMOH2K1,325,000 1,323,000 (147,000 x $9)

2,000 (underapplied)