Economics3.46 KB
Work Documentation and Labor
- Ballot work: A format prepared daily by the employee for each task.
- Labor: Physical or mental effort used in the manufacture of a product.
- Timecard: A record of total hours worked each day by an employee.
Inventory Management Systems
- Periodic inventory system: A system requiring a physical count of items to calculate final inventory and the cost of materials used.
- Perpetual inventory system: A continuous recording of inventory additions and deductions.
Production Capacity and Costs
- Expected capacity: Based on estimated production for the next period.
- Normal capacity: Based on practical, demand-adjusted long-term production.
- Theoretical capacity: The maximum production a department is capable of achieving.
- Fixed CIF: Costs that remain constant within a relevant range of production; these are necessary to maintain production facilities.
- Variable CIF: Indirect manufacturing costs that vary in their entirety, such as direct materials and direct labor.
- Mixed costs: Costs that possess characteristics of both fixed and variable CIF.
Departmental Roles
- Production Department: The department that carries out the conversion or production process.
- Services Department: Provides benefits to both production and other service departments.
- Relevant range: Levels of production where total fixed and variable CIF per unit remain constant.
Costing Methods and Profitability
- Absorption costing: All production costs, including fixed CIF, are charged to product costs.
- Direct costing: Production costs that tend to vary with the volume of production.
- Contribution margin: Sales minus variable manufacturing, selling, and administrative costs.
- Gross profit: Sales minus the cost of goods sold.
Decision-Making Formats
- Cost of materials consumed: The cost of materials sent to production.
- Cost of MOD: Price paid for the use of human resources.
- Opportunity cost: Benefits sacrificed by choosing the next best alternative.
- Accept a special order: Deciding whether it is beneficial to sell products at a price below the normal rate.
- Removing a product line: Deciding whether it is beneficial to discontinue a specific product line.
- Make or buy: Deciding whether to manufacture a component or purchase it externally.
- Mix of products or services: Deciding which products to offer given a shortage of a unique resource.
- Sell or process: Deciding whether to sell joint products at the point of separation or after further processing.
Analysis Formats
- Cost differential format: Relevant costs and revenues are presented for each optional course of action.
- Format of opportunity cost: Presented for a single course of action.
- Format of total cost: Presented for each alternative.
