In managerial accounting, costs are classified into fixed, variable or mixed costs (based on behavior); product or
Question:
In managerial accounting, costs are classified into fixed, variable or mixed costs (based on behavior); product or period costs (for external reporting); and direct or indirect costs (based on traceability). Classification of costs based on behavior helps in cost-volume-profit analysis. Classification based on traceability is important for accurate costing of jobs and units produced. Classification for the purpose of decision-making is important to help management identify costs which are relevant for a decision.
This exercise is designed to familiarize you with some of the common costs associated with the ERPSim Game. Understanding how to classify these costs will give you a better idea to forecast, control and report costs in the game or in an organization. Refer to the Participant’s Guide for more information on the individual costs.
Instructions: Recreate the chart below in Excel, and for each cost, indicate whether it is:
(a) Fixed, variable[1] or mixed
(b) Product or period
(c) Direct or indirect
Cost | Product | Period | Variable | Fixed | Mixed | Direct | Indirect | Cost driver |
Labor | X | | | X | | X | | # of employees |
Materials | | | | | | | | |
Depreciation (M/E) | | | | | | | | |
Shipping | | | | | | | | |
Warehousing | | | | | | | | |
Interest | | | | | | | | |
Advertising | | | | | | | | |
SG&A | | | | | | | | |
Manufacturing overhead | | | | | [1] Variable costs are the costs vary with respect to units produced/sold in the short-run. |
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren