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Adequate Professional Guide For CMA Learners
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Part 1
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Budgeting concepts and forecasting techniques
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8 Budgeting concepts

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distribution instructions -) #
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Buy-in at all levels'= b
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concept of controllability
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controllablecosts -
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Non controllable costs
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) Time Frames for Budgets
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Participation in the budget Process - "
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The use of Cost Standards -%L8 d^
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Theoretical vs. Practical Standards -
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Authoritative vs. Participative Standard Setting -
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Participative Gross-roots -
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Steps in Developing Standards -) " D

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Activity Analysis - U
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** time and motion study & 3:92 ;9 37 O1 V
i% ,5O1 1 stop watch . 3 1 stop watch G1 a
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= O1 & Y i%9 3 N] c3.
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- Historical data 3O
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C)
Q8 )( h9 f) )
D budgetary slack
9 Y 3 9m6) 3 >9.3
3Q9 ,@ 9- . x Y , ,%9 3 G6 C9< 9QQ9 < Y 7.% . 3
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>9 3 O3] c9{ Y> x k ,=9 39 3.
@ 9 32 9 , 3=9 < - 3. 3
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3] Y< O YC] - V@O { 3 3 YC 3%. 3-C
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Correlation and regression' '%0
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9k -1 - .9 9
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34 ,1&2 ,- 3 < x - 3-5 34 9 C -

correlation analysis 'U
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,. 3%&. jk Y 9. Y9= Y 3@O 3%&. % ) -
(coefficient correlation)r
)
1 < 9= % ,5 3%&. jk 19
scatter diagram i>-
- Y 9 ) ,.( r) 3%
3 39{ 3%& ,5 : 3
3 32C 3%& ,5 :- 3
),. 3-@ 3 i - 2 VO h> 19 -
9( r)
3 39{ 3%&R=1
3 32C 3%& R=13% 39{ 3%& R=0.7
3@ 9Q 3%& R=0
Y9= Y %&{ 3%& l h .l k = ),.

%%0 UD Coefficient of determination ),. K9 2
Y9= Y c< Y ] ,.
-2 < . , 32 3% < -C= 9YC K

92 ,% Y= 9.,2
& . < ,2 6 x . 2 6 3
5
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. % Y= < 9. 2 6 Y. YC
j92=9 < ,
*** T B9.. 9 , Y 9.: %2Y
=Y9
Regression analysis U
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3 3]A & 3% Y=9 7 3-2
@ h- c- ,-9. 9=A least-squares 3-; .3
@ 3 BA 3%&. Y= Y9. , 9Q9
'%0 Simple regression

E
O2 k = 9 ,2
. 3) @O V2 3=A VO 396y=a+bx 2
&(
y= 9) K. 5
a{ K) 2 V)( K .
b , Vl
x= 9) ,2 < G2= 9= 9) (K&(
< ,m V ]& 2 36 > cO2 2 ,- ,6 9. <2- . - 3@ ,C 3 VO2
){ 399. 9=A(
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= - l +9m < - 3 )& c
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y=$+ X
-> 3 a
->9 7C 3a - V@O k =1 - h&l

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X 311,741 +$a4200000=y
$=$+ X
$=x
k . 3)& $ u- c. % 3.%
- l.
,-) - hAO =9 331 BC ,-) @O V2 9 9 Y ,2
46 5 i= BC- 9 3@-O=9 3.39
9 ,5 y 146 5 i Y BC { K VO 2K

. . , V) 46 =9
) l & 3%32 - Q9 Y 9 xy, < 1 3%&.: 39 YC 3@1
T ,9
,1 -5 6. car washsunny weather, 3%& 7
YC 3%. l car wash G2. sunny weather
Multiple regression'%0 %D

k -1 O2 95 Y= 9,2
Y5 2 cO ) @O V2 =V< Y9
)&) (,2.).< (K . - 95 Y=9
,2 3&l.
Yk 5 m ,5l h < 3 .%-.
< h 3 =9 95 i2=Y9
) . 9>- 2 3 ,95 )=9 (3-2 C4

,= 9< x - j9 36,C
D '%0 %D y=a+b1x1+b2x2+b3x3+b4x4
" ) '%0
- 3%&. 3@O> yx, &C xC V< 3 Y& relevant range
** > ) 6)( k Y& h 3-C=9 - ,:3
k BC5 3C < 376
3-C)< 3 < 3C [ 3-C
> k > x Y KA) 3% h K .
Y
O2) B-C =(3 9. - > G1
- 3%&. V@Ol h . Yk
,-) 9 %&. 2 3 Y=9 Y YC V@O
7@ < 3-1 39.,2
y % K= 9 K V)C i 3-O x>
k7 K hx8R 8S jk -1 9. 9 3 K
K; .
Kk < %-1 ) O2 YC < V C 3-C,:
9Q=9 Y9 23
*** Trelevant range -@A 9

BC l= 94 O 6 K-2 36O
k . l BC= 94 )O - 9A
>= nS
U
0 0Learning Curve Analysis $D
[C.. 4 k < h-v 7 3- 7 <

9O 7 32C4 Y@- x 3 37 3. 6 9A%&
9 ,l t.
-. h 9. 32`4- 3 Y) % ,C 37
t 3m 9
32>] 3.O2 < 3 G %
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,t 3m < 4 % Y% 32
. i%9 Y,
9 336
36
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Y 39 3 95. < . i% Y YC

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k . 4 Y , 9 .
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l9 < V2 hl
< 3.9 ,% 3.l9) (-. 4 9 jk< 3.
%,. 4 O < 3.O 329 %,
)(%,x-%,
=< 7> Y;9 CMA@- 77@ 3. 3-`1l x2
2 G-@ %. 4 - . Y< Y6 &j
C 36 3%
l Y C 2 l i% 35 6 C

l 9=1 . 4 l Y
l Y V< 35
& 9=2 7
5
< 3.)-Y( C Y % 7 % 32 Y4 Y9=2 )

< 3.) 3-Y( < Y Y) % % 32 Y4 Y9=2 )
< 3.l
< 3.)35-Y( Y) % % 32 Y Y < 3.35
< 3.) 3.-Y( Y % 7% 32 Y Y <3.
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< 6 a l& Y@. Y9
Y 372 ,5 -. 32 ,C %G3mt

) (A 36
) (B. i%9 -
,5 . i%9) (A)x(B x36. i%9 -= i%
9
Time spent on most recent unit i%9=2 )
- ,5 i%)<3) (B ) i% <3
) (A) /(B V1 i%9=2 ) <3
l- . i%9 < ,6 & j 2 hO1
-1 @O .6 k C YC = h<9. B 2
. i%
l& Y@ Y9 < @ 39 < 72 i% :. CMA 3-`1 O1 -1 . i%9 c-@ Q
h- " -.-"
% < -. G ,5 h. < 3 ,C; 3<9. -. h< ;l x 9 -. YC>9 l9. 32G
= O2 < 72 7 < . l CO2
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% G 329 9% - 7 jk.32
>= #
U
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Time Series Analysis
,- ,1&24) V@O 36 3-29 - 4C9O 23

j6l ,- h- c-@

3- C 7 C Y4 9 l 3@> < 9=
Y Q9 - ,{ 9= : (secular trend) ,{ j6-
9A < -
l Y < 3.]; ( seasonal variations)31 9=-
< > >9 9 3]46 6 :.
> 2 < 9=( cyclical fluctuations)3 --
(-C A%l < -),.
irregular or random variables(3)3 9Q 9=-
(9,9,3 ) l - 9 3.% 9Q
311 ,>(j6 ),-)34 ,1&2 ,-simple moving average 9 V2 V1 -
weighted moving average 9 9 V1 -
exponential smoothing(1 7)1[ 6 -1 -
1l 31 -1 h- c-@ Y
0
E /) 39 [ 2 92 N - G-@ C 3]& 3 jk
.31 9=-
34 9 - 2 K6
.34 9 Y 3. 6 9C 3-. jk
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35
Budget Methodologies And Budget
Preparation
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% %LD %D internal rate of return***

0
!
! / ) %9 " %E %LD %D)
.S/'
payback period method***

S/s 8^ /
/'
/ ) %9' ~E j) %! US
.
L% S/' 8^
%L)8 ~
%D the interest coverage ratio***
%L)8 Q/.Lx %L)8 U C &" E
uX E)` C% !% 9~

") %L! %E %/
&" C~
U uX E ".Ux
4 3 3% .O1 3 9 31 3]% ,3%-4 3 3% 9 3 4 3 39= 3 < 3@@O3
] 4O
- 4 3. 3> 9x ) %. %7< h 3-
= 3 . .7.
5 % .9 4-2 >9 32 7-
3. Y Y l 3 7- G24 3.
3..
3]%< 3 3% BA&A < 3. - ix Y>@ 3>= 3-)51 3.3-
)The direct presentation reports@ 39;9 9. 9<
(3 ` &A 32]9 < 333-.>=3-
9 .7
)The indirect presentation reports@ 39= 9;9 9. 9<
c< (3< , K< < 3>= ,v < 3- 31
l .
% 3
k < c = 32 A<l 7 9. k j
324-2 4 3. 3 ,5=9 < 2 &. 2 Y4O.
,] 3% 9@ 3 7m. 3]% ,5< 1 3 >- ,9%l K%] -k 9%l 1 3]% < 97: ,.3%
Part1
SS %)
Cost Management Terminology and

Concepts
8^ 0Q $
8
8^ 0QCost Management Terminology:>=

Subdisciplines of Accounting /0
98 QQ -
.(x>) YO 7O2 9 11 7
/0 -
9. < 3 ] Y 36 & Y C 9 jk
.3O %& 3@ 7 3 31 C kC . l
% 3 31
.(x> ,)Y- 7O2 9 11 7' /0 -
1l 9 9 Y2 K9 .3:

kC C 31) 3 37 3.,2
-/0^
\ & Y 31 3 31).3
-. AO 3-C 32C 3:- 3C-72 YC
)3.< 9 &C (3 YO2 YO Y.Y-
Basic Definitions -
- B9. 7. Y1)3-C- Y
< - 31).3
3-C 9. 3 O29= 3
< -@A [ h -@A>= - A -@A>= -
. 9. -@A =9 ,5 3-C,32C 3-C< ,3 3-C.3
< - 31.3

3-C 2O 31 3@1 9.2< 9.2@- <A- h.
- K]m.
-@AO2 Q 3-C > 9 3 3.-2 3 A
.7- O2 3-Ck7 < . 3-C ..,
C <2C- K) K-1( im` k 9A 3 3-C 2.
CostObject - BC c<9 h BC ,56 ,9 ,,,Yv

2% ,&72.
CostDriver - G2 3-C 1 O2 K - 3-C .3-C
Cost Driver B9. ,% Y IMA 7. hx >- 1 ,5
,.;1 ,9 , ,3 i%O2 1 ,G1- @9,
@ ,3 . 9.3
k ,5 , < i% , - 3-C .3-C
G6 G2 11 3-C & 3%;9 G2-x 9 Y3C
3C-72 Y > 3-C).3
Manufacturing vs. Nonmanufacturing -

BC < 3A 3- 9Q BC3A
-^
\ #
Q d^ d \Q)% d)
-) -& 9 31- 3- KA YC
) G2 - (, .N5 . - 1 3 Y ,. .3-
, BC O G- O V) ,5 BC ,2% YT 2 9 C )3m < (3- 3-C ;9.
- UD . 3-C ,.>9 k YC - (,) G2 N

,5 -.Y
-^
\
] #
Q C Y , BC 3Al 7C>,
;9 ,.;.9
-) ]
& 9 31- 3- KA YCl G2; 9
)(, .N5 9 G- O2 < . Y ,. .3-

] U9 - 3-C ,.>9 9@ 39 3- KA jk3-C
YCl G2; 9) (, .N
5: > <9 V K6 .3<:
-^
\ #Q~

,5O 9m] G. 3x Y& .
.KA
-^
\ ] #
Q> " #)

-^ 8s
2 ;9+ ,.;9
,5 -: BC BC G2;9 N ,;9 -N
-^ 8)0 U 2 ,.;+9 BC 9Q KA;9
,5 -:BC 3-C , O N .
' - f )D
Q #
Q( "| X =E U 0^
\ ]

D
Q
-Q"
)
D)E!
( - BCC A- - N YKA
.-72 ,59 2% v K , BCO- N
-Q" - BC C >9 3 l9 V>,C
; 9 c2 .N ,59 Y9 Yk& 94
.2]9
-^ 8 " ! ^ 88 Product vs. Period

Y G1l , hC Y9 ,193-C
46 Y4O ) ) 7%&71 (7 3-C 7-[ 9
7< i G ,5.
- BC N @ 7- c-) Inventoriablecosts m 3-CY.
K]m>9]77.A=9.(K
jk BC ,1946 Y4O ) .
jk BC 9A> ]7 ,C4 11 Y 3-C 3m.3
- BC 39 cG.k7 &C4O-19N
.1 Y 3-C3m.3
k )& Y BC N BCC 39 1 G236.
@- BC- 3 3A Y9Q , 9O3
Uw "- /0!) ) 9 s
< BC)3A ;9 , ,; , 9 9Q 3-C;9)=9(
9Q 3-C;9) = (3 N. 3-C.N
, BC 3.) = 3 N.39< BC
k h- c-@ , BC)32 BC.(3-C
- d U%9 ! %

36. 31]< 95 Q V< ,19 BC 3A=9
BC N N.< 3 BC9 3-C
<93.C&5)3=9465&C9A<3.)39A<
).
k h- c-@ , BC=9) BC;9(
-6 a O- Yk.Y-
jk6. =@ 7C < , 39

-^
\ " ! ^
\ ]

YC BC 7A 3C - 7AAO 3-C
^8 : jk YC BC C 9@ 3 3-C 3.-1 -
A%
jk BC;9 YC G2; 9 -.
3-5 jk BC ;9 ,.;.9
^

~8 : jk BC YCl 9 V 3-C 3.-1 -
A% Y < = h jk - BC - .x 7A kY
9Q 3-C;9.
3-5 jk 9Q BC;9 & 9Q;9 9Q ,.;- 9
3-.KA
3- V2 K 9Q BC;9 9=C;9 Q.6
.6 (cost pools)3-C
Costpool K6 3-C 2 h- 9 3 Y BC3-
K G1>9 7 K6 h.BC
BC 9Q 3A;9 O2 K6 3-C h- BC3 YCl 7-> ,C; 3-. 9 KA N jk BC ,% K6.7.
-^
\
T 9 9Q 3-C- 4;9

&
3-C>9 3 7< 1 3-C 95 Y -.2 3-C 5
.> Y. ,19 96 3.x Y , jk = BC -
K-1.3
- BC->9:3 jk YCl BC G2;9
(cost object)3-Ck k BC = O1 1 .
.:
-5 :)& - 9 42]9
jk 3-C;9 . , K ,C YC . 3-C>92%y 3 3]Ck7
Y = . , K 2% , -.j
**>= S
-1 @) G1( 3-C-

- > @) G1( 9. 3-C Y& 7 BC=9
,C ,: 3 BC5 3C % 9Q.9=- 3-
> > x Y KA% h K ,..Y
- BC=9
- 3-C=9 ,C ,: < 3 9A9A Y 9:2 )
6 < 9= K 2 9{ 7 < 9= BC-
N N , < O2 C 9; Y G-@ 39> -
S^
\
Y 9: 9A9A < 9= 9Q ,: 7 < 35 BC -
)2
.,C VO B% h2 K6 VO & <
5
>2 K 9; 9Q ,C> - 35 3-C
-5: 3-C VO 3O K6C 92 YC 3-C < VK6

% )
-
m9 BC 3=9
BC h;) 3@-O=9(
5: 3)62 3 < 7 Ym6 i 97; ,)< 3

9A<6<27.@--C3.
-59; : 3x2 9 VO 3 ,. CC

3)6 < 3. l )< 3 >9 3 , 3-C<3
l ,C . 36
- 46 5 i= BC- 9Cl 3@-O .

< 5 2 c Y = C jk4 1 . . C
39 {9 9 BC 3@-O O2 > ,C
High-LowMethod --1 2 -ll >-

jk@ 39 ,% 3% 7C91 Y@ 399
9 < 3-C Y2 -2 >- - 29
< 2 > ,A C 46 = 9 Y.3-C
-59;: 7 3 3-Ca3
- V2 Y c> YC9{ Y 3-C2 Y 3-C

2 >- - k < m5
9 < Y2- 3-C =-=-l
- Y c> YC9{ Y 2 >-)1 ,(3
Y2 >- -.
9 1 Y , 331=-=Y2
-46 = 3-C- 9 C h- - , 31 ,C,3
l.31/
-46 5 3-C- i YC2 h &]>- 3 -
; < 97 @
46 5 i Y=3-C -3-C46 = 9 Y.3-C
,,,,,,,,,,,,,,,,,,,,,,,,
= l, x31)-l(=
l-l=l
@ 39 93546 5 i= 9 Y BC3@-O

(scattergraph)regression-1 l) 19 (i>-
jk@ 39 95. V1. = BC- 9 Y 3@-O =9
Y 2 - < @ > .
Linear vs. Nonlinear Cost Function-

^ 8
" ! ^
] 8

Linear Cost Function
- jk BC= 9. i 9Q ,:=9 9 9A
3-C5 ,C 3 YT G 9 .5 3 9Q 3-C3@O
l 3-C5 ,C 3 7 3 97C=32
< c-.< x 3-C5 ,C 3 9 > Y x
< Yl 7{ K) x K{ K K y2 >=(9
3 jk BC Y 3 3 Y 9 G- >.
- T 9 Y 3 9Q 3-C 3@O 3 3-C3
Step-CostFunctionk i& @% =9 9O-
YC4 )N 9Q 99@ (3 2 > 4.
& Y BC5 3=9 YC 97: ]A 3-C3
< < 2 c jk BC. - , 7 3-C=9
.35 BC Y 95 9 BC jk < 2 K1
Relevant Range and Marginal Cost -

%0 8^ Marginal Cost -
>2 < 3@1 39> 7- 3-C
&>333-C&:9m.Y. 3-C G2
9= BC , 7% >7 C2 )1 -
- 7 N 3 95 476 h < 51) .,@ -
9= BC- ,% m 7 N YC 35 BC <
.- ,% 9= 3-C
nS>=
8^
\ Q Cost Classification
Cost of Goods Sold and Cost of Goods Manufactured -
3]46 6 ) 3]46 9( c%)9 2 3 3m 3-C-
. 4O Y 3`< V< 7
4O 9+>9-4O a 99= 3-C 3m3
-2 4O C 95. ) KA- 32 C Y.A 7
`< 4 4O- 3-C3m3-.4611<
@ h- c- 3-C 3m 3.A2 3- >9 9.3]46
4O i>= ,+ BC-KA4O i>=T ,=9

3-C 3m3.A
- jk7 32 C ,C a
3 Y2 3-C 3m ,C 3 Y 9 3]46KA

:sE ^ 8 9x 9 E>=L
4O +>9-9.6 A=< >9
- Y;+,
------------ 3mK- 3
4O T9------------ 3-C 3m3
===========

:E ^ 8 9x 9#Q E
4O +>9 -9.6 A=< >9
- Y;+,
-------------------- 3
O1t
4O T9------------------- ;9 O2< 3
)
+ 3-C ,.;9
9Q 3 BC +

9;
---------------------Y 3 BC
9
,=> i 4O+
9T ,=> i 4O-------------------------3.A 3m 3-C
KA 3 3m 4O+
--------------------------K- 3 3m
KA 3 3m 4O 9T
-------------------------9 9x 8^
===============
Controllable vs. Noncontrollable -
Controllable Costs-
7mO 7 Y BC jk x> 9A 39 h 39> 2 9
Noncontrollable Costs
h- h- k 4- BC 9 < C < 9A 39 h [ 2 9
.BC jk AO h - 2
3: < 3-O 2 BC - 9@2 3C < 9 -C -
. 3-C 3.{ < 3-x i2 BC - 9@2 3C .
3 jk YC 2 ][ G] ,% Y h- 9@2 YC Y lT - & )
5
.KA 9 ,% Y 7- 9@2 YCl
Avoidable vs. Committed-

Avoidable Costs -
c9{ Y .2 YC BC - 76 YC BC
.3.< 95 ,C> 7v< >
. )Y B% c9{ Y 9< YC 9; 3-C 5
Committed Costs -
7.< 39> 7. BC jk, 476 KA . ) Y x>
. )&,6`1 < ,3. G]9m ,Yx BC jk 3-5
) 2 ,- O YCl 3-{ BC 7.@ BC jk
.9A
IncrementalCost 3-C< 3& 3 49 3 Y. ,5 3-C39

N<.3
DifferentialCost 9 < 3-C9 3-C)Y 3-C(3-

** = < 9 3-C5 3=9 k 36= < 9 69O
59; : 7- 3 O Y @ Y Y
-O )< VO) 51] %, j- l
-O )< VO) 5 51] %, j- l
3-CO- 3- Y 9 Y V) ) V) 5
<C l.
< K% -. Yk)Y-@A 3-C)< 3 O2 Q (3- @% 393-
-.
3-C < 317 , 3-Cl3
EngineeredCosts - 3%& 7 BC;9 G2x ,9 jk 3%&.3

3C Y2 9O 3 .3C-72
5 : ;9 ,.;.9
** ^ 8 9 %D~
US> $
D /
ManagedCosts=DiscretionaryCosts-
BC 4. x < 3 32 Y2 9O 3 3C-72
& .( 1
3-C= 9 3729% 3@1 Y) 9 3. ) 9) 5
.9@ ,3A )& , )&O :5
-
explicit, Accounting, out-of-pocketcosts m 7- c-@ OutlayCosts -
.3-.< 3 <G-@ BC jk(39 3-C)
.31 K< Yml BC jk 3-C 9 m , K< :5
(3A ) BC)6 9> 3-. BC jk***
(3 3-C )implicitcosts m 7- c-@ OpportunityCost-
, Y [ 9= O1 c9{ Y ,A 3.] 3. A%
.% , ,m<
, ,. Y l
3-C m 36 ,A 3.]m - 5
.i%
h. j9x Yl Y , O1 k
3A% 3-C EconomicCosts -
3m 39A BC Y & 6
39 3-C ImputedCosts-
YC< 7 3-. l h Q9 - 9 K 7-> = BC
.2 7 9)
opportunity or outlaycosts C BC jk
C 4O 2 ) 9 Y 9 k 3C . 36 K]m 9:5
O
3-C < 3-A , 3-C=3%9
RelevantCosts- BC1 3-2 - 3%)9 kO

, BC9 9 C 3 Y [ 7x - 99.
** jk BC 3-29 Y] ,@9 3 4- 37 Y BC 3-A
7 [ BC 3- ,-],
5 : BCm 9 329 3..3-C
SunkCosts - BC=3%9
&
BC C < 7.>9 3 7. 7- YCl 92 2
) jk YCl BC 76 Y B-O KO 7< kO 7 i23-
9 .,2
51: -. im -2 l9% < 9 m 3293.
HistoricalCost- 3-C3O
9.2 -.< < .,
Y1. Y > -k 9A. Y BC , 9943
3-C 3O 3-C=< 3%9 Y1) Y K BC
9 3m < 95O 9 .
-
3- Q KA@ ->= , , ) ( @ 3 C 6
% 3]7 4- 3-> ,C ,,A jk@split-offpoint 7- c-@ 3
Joint costs
BCC >9 3@ ,% 3split-off point ,A

k C 72 7> ,C; 9 N ]7 G6 .7.
Separable costs
BCC >9 3 3@ . { ,A 6 3-A %4- 3-
@ 3)A split-off point ! %9 UQ8 > CQ U
=
Joint products=By-products
6 3% 3=9 . 2
jk6 < N i% Y& 3- KA>96 3 % 93
.9
5 : 99C9.
- BC 7->9 < 3 G- VO 9 3- 3]46 ,5BC
>9393-3]46@.BC&A<3
{ - V j99C 6 3]7% 3-O)4- 3- ,i-1% 4,9(Y1
. BC jk6 %)3-2.(,A- 3-
- BC 3. ,% Y BC -O Y< N 9 G1 3 .6
3.)3 N (2]9 76. > 3A . jk N
.
vs. Abnormal SpoilageNormal-
Normal Spoilage\

D
. Bk < ,v9: >= ,..3
k B 11 YCl 3-C - 7< C 9A
B@ .- ,v < K% >= ,3-CC6.7<3..16

h-C , 3-C N.]7
Abnormal Spoilage\ ]

D
B= 9 K%9v ,v < h >= ,. 3.3.
3-C 9Q B@ = . h.> ,C ,2 u-t h.
9Q B@ - N. . h9< 3-C)2( h.{ G2) 36)3]511,
.(Y4O
Rework ,Scrap and Waste-

Rework-9 ~
U
Bx Y6 l 3]7< c K 9. YC 3. jk6 YC7%9
% 3 K- 3-76 <.
9 >= , N -O9 h - 4C )9 G2C YK
76. 3-C) 39 >=.,
Scrap-! "Rx
9~
U
Bx Y 3 Y ) l YC4 %O1t 3- )9Q & =9
l ,- jk &m O2 3-. 3-O & 9Q Y
. < Y- N 2]9 C `.,
Waste-! "Rx)8(
C Y 3 Y ) 7 . YC <] @ -7.Cl3
9.1= -O.7
Other Costs -
Carrying Costs-
Y4O,Yx , 3-C Ym 4O - )Y4O BC
.N%9292C2
9a 2% Y , BC Transferred-in Costs-
.. 3 )2% ,=> 3 < 2% 7-2 cl 2% 7- BC
"x !
8^ Value-adding Costs-
3@1 3-@ 9O 3 6 O .1 YCl 3@> BC
.3: ,.
Manufacturing Capacity-

D
Normal Capacity-
( &2 G-{)G-@ Y 9 2 k , ,@ < V1 2
<9)9=3319=->2k.3 9<
.3 1 < . 3. 31 <

D Practical Capacity-
3. N 9O j k ,5 2
3A G2 76 YCl < )9x 2 2 k
9Q <9A- O 7 N > 2 9 1x 3-. 3%@ O1
2 ] K% O1l 2 ) 3-. OH Y 39 KA- 9;
.-. O1l
(
S )c Theoretical (Ideal)Capacity-
, 3- ,=> - 9<( 3%{ A% )-5 3%@

.B% %
#>=
8^ !
Costing Techniques
Absorption vs. Variable Costing-
(9)E ^
)8^ Absorption Costing -
32 3-C BC -C , h- c-@
N BC 3A BC , N.
9= 3 i 1 )BC , ,> kThe Inventoried Cost -
GAAP ,v < 9 , Y 3-@ 3 jk
< ,5 3 K]m- 3-C 3-C . 9) <A Grossmargin-
.3 )3.< 9A 3@=
( ~
)8^ Variable Costing-
3-C 7- 5 N BC 7 9= 3A BC 9. V< , k
.K- . l
traceability K - 7) 3--m 9. 9; 3-C
1 - BC > - 9; 3-C AO K -
(3% 3%&)9x G2 3%&
>- G. c 9< BC 9. S
9Q^
\ -
K < 7C GAAP ,v < 7 2l (9; 9= 3-C )3 jk
- 9
Contribution margin - (]) b23

9) <A . AO h , BC=9).,3. 3.(3
< ,5 =@ 3 BC53
->9 V-2 jm - 36.` 3-O ] 32 YBC
BC
--------------( a) -
BC) =9
)( b
BC) 53
)( c
9A< 3. 3=9
(d) -
9A< 3. 33
,C 92 Y BC) =9 9A< 3.5 YC 3,v < j4-1l Y. , 3-C.;9
)& < YC 36. BC 3-O) 5 39A< 3.)3=9.
Actual vs. Normal Costing-

D8 8^ Actual Costing95 h i% Y k ,% m h< K BC K6 -1
. -
K6 3. BC 3O C 3-. BC , ) < 9< 37 .-
. 9; 9Q BC
9< Y x> 9 - < 9 ) < 2 - 3% , BC l -
.3--m 3 -. 9 hx; Y G- k 9

D
8^ Normal Costing -
9Q 3-C , YC BC - 9; ,. 3-. 9; ,
3 &3-C < - Y . k( 3.{) 3 l. 1 - 9;
.3-. 3-C<
D/)
D
8^ Extended Normal Costing -
9; ,. 9; ,> 3.@ l.- hO1 K1 k
l. O2(9;9Q.,9; ,,9;&) 5 32]9 <` & ,<
.(3.{)3

9Q ^
\ #
> Accumulating Manufacturing Costs-
)9 1 - 3-C Job-orderCosting-
k )-1 G1 6 9< ]A 36 3.-13-

BC@ 7 9 33.
, 9 h ]7 N {9< K @ c 9)
5: 3 6 . - 3&.) C (3. ,5>
.Y2
d9 R^ 8s U0
*** $>
#^
\ & ^ U Q8
&D^
\ h jQQ )) )( Q" ]
")
9 "! s%D U
0/
%0 ^ 8)% > : ^ 8 '%9/ )% >
e '.
Process Costing-^ 8U
O2 6 @ 3C 9 -1 92
- BC@ 72% 3. 9 , 3. Y) 5 32 3
-.
l Y @ 7 N < -1 9
- BC@ 76 ] 3-
) < 3-C9 ,> ,2 V1 ,C 3-C
l{ 39 V19
l
@ Y9 95O1 { 39
- . 9Q ,:9< 37 < 3 ) ,9 C 2% ,C 32 > ,C 9
h- - BC 9Q< 3 = 9 = 3 . 7.>,C
2 < B-O .t 3 )(EUP
**)% D
"`
^
d)% ~
d
&9 %
^
\ .E0%D i ` ^
)
D8% E d

Q9^
\ 9 UQ0^
c )% %9%/ p8^
\ d
QD
S :8 ' ~
" 8 %
j uX)% .E &9 d^
\ j
) % )% D

) % )% D
^
]
9& 8 % )% D
Activity-based Costing (ABC) -^ 9 8/

l Y@ 7 K-23
9 V BC>@ 3
--1 - 3-C1 > ->7 -. 9.2 N >x
- 3-C1 ) peanut-buttercosting: - < 2
(3-C ,5. 9Q c% K BC< 39@- - 3-
N O O2 9 3-O Y.
** $)0 % U^ 9 8/ '8 E%/ ^
\

/| ^
\ .E) E " #^)) .
"^ X c !) 9
Q^
\ '`"
9 9 $>
" Uwc !

% $
Q 9 s= ^
\ 9 $>
-9 : Y BC- ) -1 (6: < O- (ABC)BC

a.
: ,v < - BC- < h K6 BC h< K6 ,9Q BC
;9 3-C 3-C -).
: ,v <- c9{ Y (ABC) BC h-: - < > , 9 ,)
h K6 BC h BC , K6 -1 G2 3-C Y.32
>-.
Life-CycleCosting - - 3-C1 N
> k -1 - 9.2 36 =@ 3 , BCC & <9
N[ < V=@ 3 BCl.
- BCC ,%) ,5 BC @ 9 3-C A N>jk7

BC 7x
- BCC .) ,5 , c2 3&. @ 7- c- BC K.
Standard Costing ,Flexible Budgeting , and Variance Analysis -

Standard Costing-^
\
D
: h A) BCt 3-. B-O 3 Y 3BC
)3<72.(3
- BC. 3 BC 2 YC7
BC. V< i2 3. 1 BC 3 YC> ,C 9
= C h-.3-C
- BC. YC 3 O2 K , Y 3: BC 9) BC9,
Flexible Budgeting-)

2 3C 3-C& = -72-. 32 ) 46
3 39 ,C 32) 35 (3 ,5< ,m&71) V@O
2 9O 1 9- 46 . 3-
-) S ] N 3-. G2)&<
jk)&< > 7x<9 ,-)9 YC-1
''S/managementbyexception
l)9< 9@O 36.% )9< k 9Q
Y 31 hl
k(.
-) #^
\
-
{ 39 )3 (C V2
3-C>9 3 -6 At 3- G1 Y.
,5 6 .
3-C>9=3 ,/N
i -!

D%D!'Q8
2 3A.- 31 At 3- Y 3%. 92 3
9.
BC>9 9.1=3 K9 @ 3)A/ 9.13@ K
)A.
(NRV)-
i!&"!

D!%!b!0
{ 39= 3% < 9. 32
)& C 7 < NRV 39{ ,v < , BCAt 3-
9 ,.6 3% N K- , , ,% AOBC- K
BC>9 9.1) =3 N ]79- BCAt 3-(/
9.2 ]79
-
i! &" !

D! b!0 # E Cj
2 O1 [ 32 b9 ,C6
@ )9 jk@39
- 32 b9 >.,
- A b9 G1 3% Y. ,C 3]7G2 C N
k7 BC .N
- A BCAt 3- ,A C 3-C>9.3
) #^
\ E %
-@ 39;9 YC V2 ,% 3% Y@9 9

, BC2% O > ,C; -92% )
l K 3-C 2% 2% 3 39.
step-down method-) #=Step Allocation method

3- 3-2-2k -1 95. 3{ 3 Y-1l ; hC 995
.3%
i!
Q% !% ) /E % E %

|%/ # UEE.
Q
-2% O 3 7.9 , G Y2% 3 :.O )2%

l2%x O 3 ,%.3
39 4
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> : 1 62 K 31 % 3
Y , 9.3
- K < = N 2 3-19K
& BC c ,%l 9Ql 31l.3
-< 9 3-C N4-2 K6 , - BC
N Y 9C Y -O.N
jk BC` k -l -1 9O 3.%
3]%-9=- , 1 N - Y 9O . Y

,9 @9 7 , .hO
-{ 9{O > x2 BC- 2C.3-19
-l{ C Y BC N 3- l92 i
. 3-. ,% Y.3@@O
-4 . 3-C 3 N 7 @.. < ,m Y,
T 9 l.
] 3 3- 9Ox 6 3.C 9 3 l BC ,%l 9< < -72 1.3
& : 51 9 < j@ 9 N YCk N
591 G2C 62 C
6 Yk )51
3-C N m , BC9l Y ,9)@ 9: <a ,m ;.N- ,
Part1
O32
K3-C
>= s
* 3-C 9Q 3;9 FOH 3

* 3-C 9Q 3;9 =9 VOH
Absorption(Full) vs.Variable Costing
- 7 Y1 YAO i 3-C)3A5= (3
) AO( -6.
-9 3]2 9Ql 9 3 3-C = N >,
, BC , 3A; 9 ;9 , 9Q BC;9
KA-5 3=9.
jk@ 39 9. ^ 8^
)^ 8(9)E
-@ 39 35 3-9.< 3 1^ 8~
^ 8 jk
@ 39 V< AO BC 9Q 3A;9 =9 -6
9Q BC;9 )5 (3 .9< BC @9 < 9 7-
>9.3
,v <-^
\ ^
)< (9)E 46 5 i Y BC3A
9Q;9 G2 , 3-C ,.N
-^ 8 kC > , , BC 3A5 i 7=.9
-^ 8 9x - 91 ^ 8^
@9 Y. ,A C
b9.
- 9A< 3.) ) 35 3=9( @9 ` kY
b9 - ,>=.,
- jk@ 39@- ,v < 3 !) ) 9 s GAAP
9Ql 9O 3 k@- ,v < 3) ` %U
%
8 Internal Revenue CodeC&9m]99
h Y , 9O< 3 3-C = N > , ,BC

.3A
variable costing -^ 8~
@ 7- c-^ 8
G2 Y , 9.3-
- 9. 3-C;9 9. ) h 9.
Traceability.3C&;3AC-9
C < Alk 2 Traceability9.
) 3-C=9 95&] 3 Y 9. 3-C;9.
- 3-C N> V< , BC 3=9.
- 3-C 3m - 31 3-C=9 )< 3 46 =9
Y 3.l9{ 3 7 Y. ,A C )](
E.
-k ) %9. BC=9( 9A ] 3,
-1 3-C=9 ) h =@ 3 BC53
) BC 3+3 3. 3(3
- Y ,k < G2 . - c-@ Y1 jk@ 39!
E.
- jk@ 39 % ) ->x( YC jk@7 i2 39
3-O2 ] 3 Y >x.
-c i! ^ 8~
BC 9Q 3A;9
)5 (3 3-C -@ 3%[ l 3-C .N
- ;9 3% 7 36 3 3 u-l - 97>-
.KA
jkC1 3-C l 9A 9: .
>9l 3 N . l = < 9 C1 3-C l

. 9 >9 3 i6 < C1 3-C l
< k u-l 9:l - h h 3-C k <l 7m
3-C4O. u-l3-C
-2 Y. Y@ 3%l.3
- C < 95 3-C=9 O2 <9= V K9 -
>x 2lO1 jk Y GAAP ,v < 3-C < yC
39m , 0Qx .L%
8
Internal Revenue Service
-4 39@ 32]9 3-C=9 YCl ,& )h< G
(h< C 3@19A l l 7C & < G,
O1 { 39 3-C.3-C
59;: 3& ;97 l i6 i < Yi-
BCl3
-x - 9] 36 3O1 { 39 95 Yl9 YC 9

< 2 l3
9.1-- K Y 3m 3 l >9 3i-

l 3. 3=9 i-l 3.3
.3
-a %] 3 3]4. O1 @Y9
9< - l < ,>= (-) , 9 % Y4O

T 99 < @($-) Y9
< 9 { 39 3-C 3-C BC- % 32 ,9Q 3A;9 ) 5 - $=%* $ (34 3x , % 32
Y >) 97 -3 = (3 4 &O1
i4O.
- G2= < 92 . l < @ 7 Y9x9 3-O
- ,>=.,
< - 3 9< < N [ < h.9 < @ Y997:
[ ,>=.,
BC5 3 39< Y 3 )- , AO(Y9 . jk79 < @.Y9
- C l . 9Q29< Y Y < ,>=,
B-Ol 39{ Y9.
)`
C
s )8
D < 4O 4< ^ 8^
: . BC5 3 i < 3m4O T9
< ^ 8~
< : , BC5 3C %iC-71
k < ,>=C , ,v < - 3-C.3-C

s U d
D < 4O -< ^ 8^
: BC5 3 < 3m4O -72
< ^ 8~
: BC5 Y 39 3&717
k < ,>=C , ,v < - 3-C=9.
19 @@O & j < 4m & 3 @c

-1 3-C 3-C 97: ;9 ,m 3-C=9 =9
9.3-
*** < 4m @ 9Q N] -A 9QQ9 <7
k . K A < 4 ,5 jk< 4 -9 3
l 6 Yk < l.
- ,>=4 , C l ..
- 9l hCkC Y ,>= ,< 39@-c9{ Y 3-C

l < .V l 9A 9: {,.- G-
- N)< .l
>9 G6 3 m . , K4 < 3-C -4O ;`3 Y < Om2 4O.
- jk 7- c-@ 31s ! U=.
@ 39 3-C Y YC @ 7 V5 37> ,C < 93
O1 3-C=9 l , 9l 2 &. >3.6
2% 3 l.
-5 ;9 7 3 . 3-C
%- %] ,. 1 Y < @Y9
l h<9 4O < 9 3 32l 37 < k&5 1 4O 9

<C ,>= < ,&5 1 < h2 @.Y9
** l a
3-C 3=9 = l x 3-C=9 -
& 32l . =9= =, x
< 5
32 35. =9 == , x
** < 3]% - ,1l -C
32l 4O h-C Y; < ,5 3-C 3=9 3-C3
3
4O + , x4O =/ x
3235
=/ x + , x
3.l 3=9 < &5 1 ) . lB-O
< &5 1 Y
. x 3-C=9 - 3.l Y 3
= , x
i-! ^ 8^
97: ,>= ,i Y -! ^ 8~
<
32l ) 35 3-C 9Q 3A;9 )5 % (3 i-1
-72 32.355
-^ 8~
Y 39 N. 3-C 9Q 3A;9 )5(3
< 39 .7< i<9
< - 32 - 35 Q9 [ Y< c "!
!~
< h <9 l Y% ,>= ,]7
& < 9 < , 32.355
- BC5 3 4 BC- 32=9 < l&< A
95.
% 9.1 Y K 3-C 3=9 3-C 3A5 Y 34
% Y Y BC 3A=9.
- Y& 37 9:< 3- 9 < G& hC- ,
/s ^ c9{ Y= < 92 l.
YCi K! ^ 8~
< K@2 l 9 & < G ,3{2
c9{ Y= 92 l.
l- < h ^ 8^
< l % i -7v
< - 32l c9{ Y 359<l < l .
& h > Y 3.62 , -lk 7< h
9@
- ,A hC&. 36 7 l K jk
36l<.3
< k 36 . BC51 3 m 4 34O
kC < , Y4 3 3]% , > ,C - Q9 K%
9l %1 , GC h N 4O ] k
4-2 Y>9 3 , BC Y4O , > x B Yk 4O
4].
< i Uw! ^ 8~
< 9l K@2l N.2 c9{ Y ,)<9 <
l @ [ ,C 3-C , < 2 1 , .
-. [ -2 l.
-& @ Y9 N. 3.l1 3 i 3 =9
- 79< BC .
m& @ Y9 N. BC 9Q 3A;9)=9(VOH

- 7 BC YC@ < V< -O Y9 G BC3A
9Q;9)5FOH (3
- G2l& < < FOH BC 36. 2 ,4O
1 B-O Y@.Y9
FOH BC .2 Y4O < u-: 94Y 3
4O 1 C < i Uw! ^ 8~
.
-2 1 , B-O i. 2 Y B-O
l.
C1 , - ,v < ,% 3-C=9 k - B%
4O 4 & 9 -O.h
4O 4 & 9 < i! ^ 8~
1 97:
, ) , BC5 3 AO] 3 , < Uw
i!^ 8^
< m. Y jk BC5 3,C; < ,19
4O.
i! ^ 8~
1 97: , < -9 O4O > ) { 39 3-C 3-C9 AO , BC53
6 3)< 3 BC5 3C)9< <(3-19 1.3
C - ) 2 .- & <9 < & @1 Y9 97:
[ .,
Uw "-^ 8~
< l ] [ < 92l j6 ,56
..
l < ,v 3-C 3-C-1 -2 ; < 92lj6
.[ Y6 ..
-- @< , @1 Y9 97: [ l
. 2 l k < m5 <

l=l < & @.Y9
Yl . C % - 99 .
-= ^ 8~
]e %
)f(
- Q9 O1 3-C=9 ] 3:
< :.> c>x jk@ < 39 9.3-
3-C=9 < ,m&] 3 Y 3-C 3-C 7l -Q
l.
l 4- 7 3<9.-2 3-C9v G >= ,.3
Y , V@O%9< 3 l 7 95 36. BC53
=9 > ,C ,Ak l < B-O 9 3-C.3-C
BC 3-C C 7%>C < 7l 7 -.
BC- 3C5.3
Uw < -^
\ ~
< Y 3-C V@O9 K9
C 3 372 Y&62 31].
9 &62 l< 3&- 9Q 7< 3-C9.3
,1 --5 R9 ^-8-$>0 C] N=9 < 6
. -< YC , G2 372 3]% Y ,. <
7 ^ 8~
YCk cl Y& 3]% ,. <
7 ^ 8^
k 2 [ .
-l 9]2O ,v < 3-.^ 8~
3%& 79
. lx 9=9 < 4O l.
% -] ,. < @ 39^ 8^
97:O <
l 9 K. 97: < l O.
k l 9 9 l.
l Y
l c9{ Y 929< Q 6 Bm
) k t.
9< 6l 9Q V< i29 3 , m@ 3>;3
t.
- i! ^ 8~
O2< 3 b2 3,m
Y.1 K 3-C=9 G6 @. 31k 9 3l
3.]m G2 < 46. 6..
b2 3 92 ,m2 l .-l
-x 9C BC- ,5 - 3< C , O% < ]4
4O < ,v 3-C.3-C
YCk x 9x 9 c9{ Y h- BC] ,.
< 3-C-=9.
-A 3-C=9 BC 3A5 39{ 3
l Y9 V l 3.3-2
.@ 3%l 3
-9 l .@2l & < c9{ Y ,
95 Y ,%l @- & 9.
< ,v 3-C< 3-C 9l hC 4 ,c9{ Y 3{2
Yl @- =9 ..
3-C=9 Y ,m 3-C 3-C Y ,1 3-.9 36 ,{ c9=6<@% ,3 9 .,.
9 - 42 3 7@% , 91l BC5 3
Y= 9O 9% KA.K
< ,v9 3-C=9
-7 , , 9% 9.2< ,mk ,5 j4
] 3-C- 32=9.
-x 9 BC5 - 3< ,x c9{ Y h-7v

jk7 u- BC> ,C < ,2 9.3
Out of Pocket Expenditures -9)"% !%
D8
jk< @- KA 36 < c 3% K 4O.
- 3%&. Y9 . , 9.2 32]9 K> 3-C. 6
. BC 3A=9 9Q 3A <
; 9 9-.3
; 99 h 9. 3 G 32 ,72 ,- 3%&.Y-3-C-69
k ; 9 ]9{ N ,. 31 < 2l - 33-`1
> x Y V@O9.
-=9 4O l - 92 @ 3. .
-% , ,72 6 ,{ c ,.9=6<@% ,3
,.l9 ] N 3O Q 3m Y G BC53
>9 3.3
- 3-`1l 3-. 4 Y. Y G6 N KA >9
YCl 7 3 3- 9 O1 { 39 BC=9 <V
-l G6 9C i , N KA BC=9 < V
, N 32 Y BC5 3. m
-l 7- G6 m < 9C KA4 YN
1 4-2 BC 3< 3 < Ol @..
9%- G151l 92 ) 1 N YC 2
hC=9 92.
BC=9 =@< 7 >= 2% ,l @ 32C % 3 9 .
-l C % > ,C< < ,m < ,Al&< Y2%l

l Y 7.> ,C.C
BC 3 3. 7{1 Y]
-% 3-C c9{ Y 37% ..
<- { 39^ 8~
< 3-C 3m1 3 B-O
>9{ ,C K 6. x 9l - ,69 .h6
39{- 3-C=9 m ,4. 3-)@9 92
= 3 < [O 9 3-C 9Q 3A;9 ,% Yl.
>= S
Joint Product and By-product Costing
^ 8> > S)
< 3 Y6 95 3-. KA>9 3& >9 3C
9O Y jk 3-. 6 >9.3
Joint(common) Costs- BC>93
- BCC @ 3 A 6 %4- 3-
> ,C ,A@ 7- c-! sQ8.
- BC>9 3> , ;9 ,.; 9 3-C3A
9Q;9 . jk Y BCC % 4- 3-> ,C ,A=
-6 >9 3 - ,) j . ,x NhA k
Y 3-C>9(3
-5: i4O YC j99C 6 . K- 3,
BCC < A - i4O 9 ;9 6
>9.3
split-offpoint -!< BC- UQ8 6 >9 3G2C
.3-A
BCC 3@ . ,A % BC.,A- 3-

SeparableCosts
BC YC ,A- 3-9. 7- 3@1 N>9
K - BC 3. Y9O.
5 {: i4O % h;9 i-1 i9 %
4 9 Y1< Y BCC < 99Cl< K
jk6 3-2 .% BC.,A- 3-
- ,]1 3 K BC>93
jk YC ,]1Y9{ < 7A
i-! !

jk@ 39O2 % ,5 6 @
i-! )%
) ^
\ s 9 U 9/ )Q>
!(
E d!
)> $(
5 -: ,. 99C9 >= ,9 , Y i4O ,
$ Y BC>=.,
] N>= < ,9O 3
< { 39 < 3 BC>9 32 @ 3Al
a
- 39{ 3{2 3 7-.6kl 7C 3 BC NK

3C 9 .h
l 9 - h G9 39@ K 3 C
.4 jk@ 39 3-71 7O1l K < % 7.,
6 3mO 39 6 i .3%
< k 36 6 3mO 39 % 6 97:2
6 3 3=9 1 6 97: ] .
i-! ) 9 #/ )E
jk@ 39 G1 Y - 3-C , - N1
.
jk. 9 O1
s^ Y entireproductionrun9 31[
.3
k BC>9 3 - 7- , 36[
.3
Entire Production Run U>
#) #
Q>)9
d= ) h & (h
-) % UL/
E
L ) 9 #/ )E

Sales-Value at Split-off Method-
D %9! UQ8
2 3%. 6- 32 3@ 3-2,A
5 :9 ,. 99C9 Y9O YC 7..1 3 @ 3.,A
,A 3@ 3-C l 3.% . 3%

$
Y 9> N 3A x G6 39> BC 9
.N ,C 3.% .
The Estimated Net Realizable Value (NRV) Method-

b!0 !%!! &" !
i
6- 32 3%2 1 - 39> BC
,A- 3- BC , 39@ jk < 7)& .K 9 ,% AO K- ,% N ,.6 39m
h6 3]7 K .1 % 9 99C ,.: 5
(@. AO- 3- BC )AO ,A- 3- BC u jk Y
9> N 3A x7. G6 39> BC 9

.N ,C 3.% . Y
The Constant Gross-margin Percentage(NRV)-

C E # b!0 !%!&" !

N ,C 9 b7 3 32 K 39> BC K
39@ jk < BC K@ 9 b7 3- >32 -
, Y N ,C .- 3]7 3 Y G1 9 b A-
.N k 3-C 2
39> 3-C ,A C ,A- 3- BC A-
< 3.% .- ]7 9.2- 2 [ O2 99C ,.:5. NRV 39{ ,v
3.- 3]7 Y l C 3-C .$

Yk l <
BC>9 3 BC ,A- 3-- AO
b9 ,C6.
$=--
C 32 b9 >%,=/ 3
A b9 Y ,- N 3-C 3m.3
A BC ,A- 3- Y ,- N BC>93

.3
-&5 {9 K - 3-C1 2 ,m<l 95C32

@ 39 - C Q9 jk@9 4-2 , 95,62
<9 95 Y 39 < jk@9 ] N ,@ c.95
By-products-
N 95 3% 3=9 2 < N i%Y

& 3- KA>9 3 K6 % 9 3.9
1 G6 6 c-. < h-6 35 ,<K Y>= ,l< jk76 72 BC
< 3 c- 3- i 9 < 31 . 35 G6 .29O.
{ 9 kO < 3->= ,l< < h 1= Yl 7- 3 36. 31 Y 3A6 .35
- ,< 36- c- 3- 35)39 (3
3< C 3 2)9 jk76 4O 4.3
- ,9l 3.% Y K6 35 9 99 ,
3-C O.3m
- 6 35)311 < (3 jk6 9l
7 i%l < 3-622 4O ,2 < k 5
9l ) O Y 3-C 3m (3 7 9< 3C 3- 6- c- 3- 35 &
9.
jk 36. Y YC99 C 1 6 % 35 -.1 6.
l 9l ) 3-C 3m (3x 9 i%l < jk2 Yx 9 K6 .35
6 9Q 35 l h< 3119l 7 i% K Y l 7-624.3
9l ) O Y 3-C 3m (37 9 9 < 3-. Y K6 .35
9A Y 9: i%9l jk76 352 <6 35 l - BC- .>9 3 jk7 3-C
36. 31 .3.
9 K >= ,l< O - j1 ,l<)( 9 2 h< ,=>-l<
3-Cl< 3 Y A.
- 3-C>9 9Q N- 39@ 3 N5 7 3-C=.3%9
>= nS
Overhead Costs and Normal Costing
^
\
]
9Q ^ 8

D
Manufacturing Overhead-^
\
]
9Q
C Y , BC 3A l ,5 ;9 ,;.9
-) ]

& 31- 3-. 32 KA YCl - ,
> ,C; - 9.N
5 : K6- O2 . K@% K6 .3-

] U9-
3-C ,.>9 9 V 3-. KA jk YCl 3-C7-
-> ,C; - 9.N
5 : > <9 V K6 .3<:
-^
\ ~
U#Q
jk BC ,5O 39m. 3x Y& . KA
-&O ;9 ,.; 9 . BC=9 -

9 < BC 9Q 3A;9 - 93
=9.
Variable Overhead Costs-^
\
]
9Q)~
(
Ym 9Q;9 9Q , ; 9 3)&,:
{ 399 Vl& 2 9O.
{l 4 V@O 3-C 9Q 3A;9)=9( .9A
5 9 7 BC=9 Y ,: 3 h-
YC .7
Fixed Overhead Costs-^
\
]
9Q)(
> ,9m] G. 3x Y 3l& < ,v {l 39
9 Vl& 2 9O.
{l 4 V@O BC 9Q 3A;9) (3 @ ., ,5 9 3-C 39m. 3l& k 3@1
9 31 ,5 - BC@ 7. 2 .
<- 31 BC 3- BC 9Q 3A;9 < K6

Y.6 9Q 3-C;9 K6 9Q 3-C;9)=9( K69Q 3-C
;9 ) (3 . K - 3-Cl O1 1 K
&] &C) Y9A.5 i=(9
-6 1 31 K < ,5 BC- 8Ê K6
G6.7.
k 9 .E^ = 8 G2- 3%& AOx 9 Y3-C % ^8 BC@ 7 .BC
<-A 3<5C< 3. 1 ,.; 9 3-C.
G2&] .3-C-
< 3<5C9< 31 1 3a 95&].3
- Y , BC 9Q 3A;9 5 3=9 1
[ ,.21 .K
- BC 9Q 3A;9 l -1 36
A% G2 & 3% G2x.9
{- [1 K&] 3 l. 3-C- ,
9Q 3A;9 -12.7
- 9 Bx 3-C Y . =9 . 3
,1 9 )(V2
9> ` Bx k Y ,C 3C1 K 1
) -72( ,5 1 ,. 1 ll .36
32 . 9< Y , .3
-5 : . KA Y h. % K9 a3
) .BC
. 9=9 3-C- 9Q 3A;9 >9{ ,C K2 l k < >9 % 3 O2 9O
1x BC- K 9Q 3A;9)=9(
. 95 3 BC 9Q 3A;9 9 V ; 92
@ 3%l 3 ,52) 3C( KA la k < >9% 3
9% O21 7x 1 31x BC- K3A
)5.(3
V@O9>- ,5 3 1 N 3T 31
1 -72 . .
l. K BC 9Q 3A;9 YC 2 7a
- 9C 7 3 , 3-C9Q 3A

l Y9l / Yl
;9 ) (3O1 1 K
9 .97; ,C
- BC5 3@ 9Q 7.=9 Y 3-C- G1
m l [ h Y9m 3- G.A
O1 1 K
2 < YC 9@ 39 9 < BC5 G6 3 =@
3@1 K6 &.-.
-4 , 3-C 3A5 3. 2 l 1
K > 9Q ,C; [C. V< 92 > l.
- l h6{ . > 97< ]51 O1 1

1 K h N9 6l BC- 3A53
h- c-@ m9 2 > .K%
- 9 6l /2 > h K%l 3
BC5 3 Y ,% - 95 Y.K%
- <9 < 3 OH BC 3-. < K62 9 3%
&.
.< i<9
5 : 97; 37 9>9 3% i- 3a9t 3 BC
3A 3-. 3 >.97
- 379 < 31 OH BC - ,l i>=,

-1 2 ) G2- -. G2(3-C
5 : 9>9 3 i6 3T 31 iC-71
C % , 3 97; Y OH BC 9a
- < OH BC )3- (39@ . 1 B-O

& k YC V< j96 ,.k
Y 9A < .
9l @Over-or Underapplied Overhead h- c-
. . Y 3- . . 3-.
Overapplied Overhead -
BC C x> 3- 9; 9Q 3A 3-C < Y]

G2 7< = N
.K% Y - > 2-
.3.% OH BC Y ,% i 3-. OH BC-
Underapplied Overhead -
C x> 3- 9; 9Q 3A 3-C < Y
G2 -. Y ,%x 9 N BC
.K% Y ,% > 2-
.3.% OH BC Y - i 3-. OH BC-
Over and Underapplied Overhead-

d
>D d % )#x
9 9Q 9l 9 -
3 3m 3-C < 9; ,C> , 9l<
5
9 9l 9 -
3 K]m ,=> i l 32 1 - =
.3 3m 3-C
5 : 3m i>= , K]m 3 3-C 3m 3 ,3-C

:: G2
-5 & j . O1 : K - OH BC1 6

)-( O1 Y.6 K BC 9Q 3A;9
K6) OH 3-C(3
K6) OH 3-C=9(
Activity-based Costing (ABC)-^ 9 8/

k Y x> BC614- 3 7 < 3 ,9Q BC
;9 N Y < K92C.
: ABC : Y2 BC ,5 3-C 9l 3-C
9.,
l Y 9 < 7-
< ABC ,v <- OH BC9 V>@ 3
K6 9Q 3-C- Y.6;9.
59; : 3 : 3-C AO 9Q 3-C;9 O1
- 3-C1 >.
l YY.6
a O2 .6 3-C- 9Q 3A;9
- X : ,.1 ABC.6 . 9Q 3-C-;9 <9< 7

&A j9< 3-C- 95: - v
-1 <` 3l.
S : - 3-C1 > 9>- 2 32 3-CA
AO .Y6
- % l < - OH BC 1 9 K> ,C

k , BC N- - 1 l k
>7 < ] .3
S:
;9 3 3 K% ) a 3. - <9 1

l ) Y K% YC G-. Y K% C
2.3
OH BC=9 G2. - $ OH BC5 % 3@V

7 ,: - 3 9.
< V2- . , 3-C- 3AO2 < k 5.
jk- < . BC- , 9Q 3A;9 1

- < 3-C.
%] , 3 x 9> )h(G-
- 9 < b9 9%l 7 9 l G-

{& < % ,C 3-C 11l. C ,.
K C jk> < ] k 3 < 3-C@3.
NormalCosting> c. , c9{ Y OH 3-C 9: 1
< i% [ 31 .
l YO1 . , OH 3-C ,C B-O < >93
5 :
O2 V1 % 9-
->9 3 K% N - 1
- 32 Y FOH 3-C 31 ,/$ u- V1 32-
@.. Y ,% FOH 3-C$, j
-l . 6 - OH 3-C , $)$,.
$,+ .(
- 3-C 6 ,C2 &5 3C
$)$, ;9 ,$+;$,+9. ,.(
[-1
%] , 3. O1 . ,@ . 97:x 9 - b9 .
%
D
8^ Extended Normal Costing-
h-5 9; BC- 32 .{ . O2 BC Y k
3-C m h- c-@ 9; 9Q 3A BC- 32 k
. 3.2 31 < ,A b%1 3 jk 3.
3-C- ,]1 3@1 l. O1 O- 6-
%
U U
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-5 :<9 : 3-C.9>- 39 3 - 4C2
@t . . 97>- OH 3-C 39u-
$ - $ BA jk 3-C 3 BA5
& > 97 OH 3-C
=9 >9 3 .< i6
.$ u-
-9A< FOH 39 (%X$)$
9A< VOH- 39 C
/(%X$)$ kC { - 3< 39
G6 BC C $k 2 Y>.
Y 3< 3 2 3mC1 3 < Vu-
$& > $) 97 3-C. X3 (36
-9l 9A- -C< 9Q 3A;9
OH$-3-.< OH $)$(3-
< ,-< ]5 9l YC 2 4 2
>@l 3 32 @t .)9 (6
4 YC c9{ Y h< Cl ) -.9 YCC

<.(h
-9 < ,5 69 FOH
-9 6 G2 $ u- j >@l 3 3

2 {t . O .2
-9 9Q 6C Q ,m 369 .
% ] 36 32@ la < 9..
-9 6 9l ,%9 3 3%h) 3-C
[l)& Y.1 3-. 39 Y&
3-..39
-9 3C < C ,-9t ]5
) 3 Y9< Y9 3-C-=9 T3-C- 9
5 (3 9 OH Y 392 <t -.
BC 3-. 7->9.3
2 h< h- 9 OH Y 3-. 7->93
6 FOH 39 VOH - 3-1 . .
& . 39O 3AAO <.3-.
< 5 OH 39$
) .+ $ X .(
C 9 3CC
-- Q9 9l 9A -C< 2 % OH

Y9A & 3 3. 99 ] 9
.6
-<9 h Y $ Y 3-C 9Q 3A;9
7->9 < 35 2 c $ 3-.< FOH $
VOH - 7-1 > 1 YC ,
. >9 3 i- =9 % - $
1 ., 31
> . 39O 3AAO < 3-. Y
N., 31 i
c-. <-)9 < ,--< ]5 9l k YC
x h< 9 9Q $ ,m9 6 2
& j 9Q $.,m
c-. <-9l < ,--&5
9< 6 3Cl ,Aa
-9 9A 6< 9Q$ ,: FOH,m
-9 9A 3C< VOH 9Q $,m
) > <-3-. > .$ X(3
3-C >
*** :3C .A - 9: 95C ,%
< 3-C < A

7 - 9A 3CO1 l 3321- 3
<9 7 V 3 9A. 3-C 3%&. Y9O
&
^8=
/%R
-9 l 9Q $,m

) FOH-3-.< FOH-3-.< VOH)+(39
> X3-.. ,9 ($
- ,-9 9t
k 9 . ,- 9 ) 9 3=9
9 9A. BC=9 9Q$,m
9 9A. BC5 9Q $ 3,m
- ,-1 9l<
{ 2 9l C @O 35 ,-1 9l
9l 9. ,m K 9l 9Q,m
.1 K k Cl > ,C].
-0" )
9 9.1 9Q . ,m 9.2 -.<
- - Y 9.2. k 1 j9
k . 9Q KQ9 <.h
- K G. c Bv>9 < <9 3 Bv

>9 ;9 B-C95 T 9. 9 9
l Y <
9Q 9.2 3@-Q [ ,m2% l
9 9Q 9.2 9> % ,m 3{2x .1 <
% 3A i. BC. 3 <
,5 jk h< 3 l @O . ,5> 3-C3{2
< : BC..3
-9 9.1 . ,m 9.2 -. ,% Y9.2
. k . Bv>9 % T
c9{ Y6 A - 3-C.,%
, k . .1 x6< imO Bv
>9 9> 3{2 9.22 BC. 3
.
T 9 9.2 ,% C K 3
- B>C % Bv>9 6 3
9.2.
,% kx<C Bv>9 - hA 9.2 ,%Y
9.2. < = ,- k i
6 9@1 3 7 ]7 N .3
< 3 6 % 3 3
)O1 9 C- < 9 3-l
-9 - 3C 9Q ,m Km- -)O1
9 - ,% Y2% l k 9l 9> % 3%91
<T %- 9 m .
Y 3< 3 O1l 9 - 9 K )>

1 h(O1 ` 3 %; i9 ,%x.1
< , O1l 9 - C h1 K
O1 9Q 39 ) 3-C(3A
< YC h , Y9 . l ,m
9 - 3C 9Q.,m
-9 - 3C ,m 36 .C < 2%
l.
3C. = 3 % Ym Y. Y B@ .kC
l 7@1 O B@C1 .
< < 9 3 O2.3
l Y < N = ]7 9 ,%x<C

l 36O1l - ,%.
C % 9 3C; ,m Y K ,C ,%N
Y 6 N-.]7
-0" )
-9 ,. 9Q 9C ,m h1 ][
l ;9 957 9 3-l.
2 3-C.9 % 3 . = 997 ) ,%(9
G Y.][ . 95
7C ,. 2 YC
7 ,. 36C 9 . 9Q 9.,m
Y YC C < , jk.< 3 95
7 C % % - Y N ,% Y2
k C % 9 y 3" 9. C ",m 9

. 9Q 9.,m
T 929) 9 . 9Q 9 ,m C % h
K . @9 h - 9.- 32
< jk G6 3 BC..3
-9 . 9 ,m C h1 Y. ,%
7 .,.- 32 C k K % h< ,m ][
. YC h C . , c9{ Y 3- K ,%
l Y < l . ,%7 2 <
7
9 9Q ,.- 3 ,m 6 3]7 ,%.
-9 9Q ,.- 3C . ,m . m i%
95 < 9 3-l k . 9Q KQ9 <.h
YCk 9l G2.1 ,%7
K% <) 9. jk % 3 9 . 9
(,m 34-2 i%< <
9 3-l)< jk 39 9Q 3C. % ,m
c9{ Y9l 9.2 ,m(
-9 3C ,.- ,m ] ;
< . 7 < Yv-. K% C C % Y
-C ) 2 , ,% K% 9.k
9l > 9 2%l.
x<C 1 ,5 ][ . . < 2% l.
-0" Q"
]
9Q
-A Y9 l 9A< 7 VOH 1

9l 9l . ,m 2%l % -
6 7 h C l ,% K%9.
9 l 9Q ,m K 95 Yl
K% h% 9..3
-9 OH 3C9 V9 ,.- 3C l
9Q 3A;9 - 7-l -1 1
,.;.9
& : 9 9Q ,.- 3C h< ,m C1
5
m9 9A 3C< 9Q OH ,m ,Y
9l<2 Y [ - 1 &.
-9 ) FOH 3 @ h- c-9 (FOH
9 Y BC 3-. 7->9 3 -3.%
3.39
< 11 9 9Q FOH Y 3 ,m K 9<l
< l Y 9.19l 3@-Q2% l.
9l C1 ,m 36 ,% K%9.
C1 x<C 1 2%l.
-9 C OH 6 3%{ 36l Y 3-O2
l .3-.
9 6 9> ,m 4 Y OH BC 7-
-l K%.9.
k K l < -. l .V@O
. GC 2 jk 36 l -.2 >

t V@O.
& 3-C5 3 Y K% C $
52 > K% < 31 > 9x 3-C
.$ 32- 3
@ 3%l 3 3-.< 31 i k C h6
$ 3-C - ,l)($ X31
C 9l $9 6.,m
l Y @ 3%l 3 3-. i ,% Y2

i.C1 k ] 9. 9 9Q 6
K%
.,m
-9 - 6 [ = 3@-2% l
9 < v K - 7- x<CY 7
9 .6
< i. 9 Y %9.< K% l 4C
9 ,m69 9Q 6C % ,m
36 h1 . ) x@O @ x v (K 36
.% l 9 K 9 . 1
36k c-Q G2 KAx.h-
< jkl k 9 < 9 C1 6 9
K G1 ,.) . 3>9.3
>= S
Static And Flexible Budgeting) S )

- 3-C. 3 : h C A) B-O
BCt 3-. > ,C Y BC.) 3(3<72
BC. 3 BC 2 BC YC
7 BC. 3 - 7. ;9 ,.
; 9 BC 9Q 3A;9 BC lc-.
) KA BC 3.(3
- BC. 3 ] N 3-.9 G2
jk9 > 7x9<.
-9 ,m C BC 3-. ,% YBC
. 39 9Q ,m C BC 3-.9
Y BC..3
- ,-9l T G1 37l ) h 3`2
,-9l YC) )51 k ,5 31@ )9< 7 < 3 Y.%)1
9< 3-m 9Q(3-m
hl -. [ @ < k )3.%4Y
.( , @.<BC--%A.<-32-m
- 39l< l - V< . 9l< YCm
-9 3% jk9l< 9C j6 jk9l<.
& - < 9l< x 9.
.
l 7=-x )9 YC % A@--=9 Y Y. Y 3`29l< - Y

l C h-. YCl C - .7
,] C 44. -.@ 9- < 92 KA[ -.
Y 39 < -. AO 9l< %C
< T .Y9
3@- ,- 39l 9 353
-9 35 [ 39 Y 3
5)3 (32]9] N 3-.k 9l > ,C9 -
G6.h
-9 35C 3 Y9A Y
-9 3 [ 399 Y] N 3-.
2 K% > ) 46 3(39
-9 6. [ 9 Y 35 3
2 K% > ) 46 3(39
-k ,-&5 9t YC2 h Y 9,
>= < , FOH
-@O a 396 2 )9<

- 35 3 ,% .9< 3 3 =9
- 35 3 [C.2 t 3.% .1
& BC 3. OH BC BC 3.l.3
- , 35 G2 3O1 G2 3-CG1
-] N 3-. .7 <9 .3
-] N 3-. [C.9l 7-A ,.BC
7->9 3.,.
&.
-2 3-C 7C K u .< 3-
-2 > 3 3@1 j . 9< 7
.3 3 3@1 m2 3-CO2 < 3]N
3-. K.1 . 3O2 < 3 K 35.3
-9l< 2 7 3&5 )9 3N] 3
< 3-. 3(3@1
-5 ;2 , 9l
- h KA N kQ Y &C % 2
3-C. 3 9 ,>=.,
- 35 3 .a
-& >< 97 >9 39 9: 1 3-O

.%] N 7 9 3-.a
-9< 35 YC 32 7a 9l< 3

9< .3-m
-j9< 35 i2 3 3=-

@O 3 3 3@1O1 2 3-C
< 3-.9 39 BC39
l BC.1 . 3O23
-9< 3C YC 9.22 7a
l- 6 9 9.29< /3C 3C

9A Y. 92 9 35k 3 9A.
k 5 O2 ;9
>=nS
Direct Materials Variances0" )
-9l< 2 3&- j ;9 Y YC
a ) 9 - - ;9
-5
BC i> ca

-5
3--l >9 3> , 6 9
6 3.
- > 97 - j9& G24 BCa.3
- 3-C.- 3 ;9 Y{ Y& C

(Y{/$ )$
l jk i 3-C. 3O2 < 3 3
5.3
37 ->< 97 9.2 -.O1 % 3
.7.6
- 3-C- 3-. ;9 Y{ Y& C

$l (Y{/$) 9 jk i3-C
O2 < 3 99] N.3-.
-9l - -C Y> 97C $,m
)l ($-$ k [ )9 -C
)9 > < c &.j
- 29. 3A2 2 3 39l -C
- ;9 9 9.1 3 ) (3C
-9 9.1 [ 9 9.2 -.k C h>93
- O Y 9.2) K% K 3C(3
l h 9 < 9.2 3C.- 3 6 7- l 9l k %
<9 l h 9 .3
-9 3 [ 9 - -. O
O2 Y ) K% K 9.2(i
l h 9 < 3C 3-C- 3-. 6 7- l 9l k %
<9 l h 9 .9.1
-9 3C- ,m > 9 . O2 3
,% Y 3C.- 3.
9 3C h > % ,m 9Q -. > x Y 6 .,%
-9 3 9Q x> ,m Y %m
.3%92
9 9Q 3CC % ,m 3`2>9 2%l) 9<l < O1 i i;9
>.O
>= #
Direct Labor Variances0" UD
-51 < -@A 9< ,.; 9 3-
-5
- :.9 ,l 4-2 2 7 .3.- 3

-5
- V kQ &C > , < 9 3- G<Y
2 97 ) -.(37
- > 97 9 & ,.3
- 3-C. ,.- 3; Y 9@- Y& C

l (Y{/$) $, jk i 3-C.3
O2 < 3 35.3
37 ->< 97 9 -. ,. 32i.

- 3-C ,.- 3-.; Y 9 32C $,9

)l (31/$ jk i 3-CO2< 3
99] N. 3-.
-9 ,. Y -C> 97 C 9Q $ 9
l ($-$) ,m k h29l -C
> < c < 3A2.3
- 29. & 2 j9l ,.- -C; 9
9 . l 99 .,.- 3
-9 . [ 99l y 3-. 7-
>9 Y 3 ,.; Y 9 .3.%
k 9l ; h9 9.1.
-9 [ ,.- 3C9 -.,.- -72

Y .K%
-9 3C 9> ,.- ,mx . %C-71
1 ,% Y 1 ,...3
9l x> % ,m Y 9Q -. Y 6 .,%
-9 9Q 3C % ,.- ,m 36 k.
9Q ,9A % 7 36x9 l
;` 3 Y % `.3
>= p
Mix And Yield Variances0" = )%LD(
*** G1 9 Mix Variance N4
N Y < 9 . 3O >936 3
9: l 3 K@2>9 3 7< C
&71 . 9.1 9 - K2 .
9 .
.1 . ,.6 >9 9A 9: 7>9 9 7 3-.1x 3mO =32 < 9
.N- 3C
*** G1 9 ) ].9( Yield Variance
k 9l i 3l 3-. Y B-O3

l . G2 i{ < 34 ..3
<- .9 ,l < & YC17
l Y
& <@] 96 O2 % 6 -< Y
5
G2=9v 9 2.
- - i& YC1< 7 9 3
;9 YC 2 Y9A Y9l<
-9 - N4 ;9 [ 9 3-C4
- -. ;9 O2 Y 3 3-C4 ) K% K
3C.(3
-9 - ]. ;9 [ 9 3-C
- -. ;9 O2 Y 3 3-C ) K% K
9.2(i
l4 ,C -. , Y& = a
-
-5
-a 9< N4- ]. ;9 YC >c

-5
- uA9AO 9t<
9<=N4
32)x3-.< 34 < 32--.4 .( 9.1x.
AQX(A%-S%)XSP
9 )].9(=
) 3. 32 X34 . 9.1X.(-
) 32 X3-.< 34 < 9.1 X-..(
)(SQXS%XSP)-(AQXA%XSP
l 9.2 G.-l -. < 2 9< N4
.].
-4 2 -. 7 YC ,. ,54
;9.
-9 ,.- 3C; YC 9 2 Y9AY

9l
-9 ,.- N4; [ 99 3-C4 <-.
l. 9O2 Y 3 3-C4 K%l. 9
.3.%
-9 ,.- ].; [ 99l 3-C -.
1) ,.- Y (3C-72 3-C 1) ,.- K%
(3.%
:l4 ,C -.. = 9 .
-
-5
-a 9< N4 ,.- ].; YC 927

5
- uA9AO
9 =N4
32)X3-.< 34 < 32--.4 .(X. 9.
AQX(A%-S%)XSR
9 =].
) 3. 32X34 .X. 9.(-
) 32X3-.< 34 <X-.. 9.(

l . l 9 G.-l -. < 2 9< N4
.].
>= E
Overhead Variances0" ^
\
]
9Q

-9l BC- -C 9Q 3A;9 >x KA
Bx Y4 3=9
-5
->99% % 3 7 ,% VOH 3-C 3T 31 ,C $
% FOH , .3T 31 ,C $
- < >99% % 3 % VOH3-C $
) ($ X3T 31 k% FOH 3-C 31)$
l ($ X3T jk BC 9O2 < 3
99 35.3
-> c=9t 9 YC OH 3-C -C2 7[
-1 < K ;9 ,.;.9
l jk9l< l); 7 7x9< 3
39 6. l . 3 YA9t Y-A
l h G4 < VOH 3-C
-5
-> c59t i Y9A h OH 3-C -C

YCk 9A. 9QY
- K< VOH 3-C 9 l YFOH 3-C
> c 3 BC 3-. 7->9 3 K
3.39
l h< FOH 3-C 32 395 3C[ >.
BC5 3@ 9Q 7.=9 < @
G1 .3
[ BC5 = 3 =@ 79A Y 9:
O1 3a 2 9O.
- Y [ ,< G2 9A 7A FOH 3-C3C
< l 9 6l 2h
-
< l 1 3a Y 39 9O- 39
-5 :
G2a )(Y{ ,C 31 ,=Y{/31
-k 9m %9 < 9O X3-.. ,3-C
Y $ XY{ ,X FOH$=32
- 35/3 39` AO k Y- 36

9 6l.
9 6l= 9Q $=$-$,m
- ,-C9) , m OH 3-C4 =9 53

)9 2 OH 3-C c%V2
- ,- )9 OH 3-C
Ym ,9l< 3.2 3& j 3A23
5:
- ,-& )9 OH
k ,- 9< ) 46- = BC- 99<

46- 359C--<%
Y Y-.9l< Ya Y9> ,C.,A
5
- ,-] 9l OH 3-C

9< l < 3C9 3 39
Y Y-.9 6> ,C,A
5
-9 3 < 39 ,-9t ]5 c-@ m

Controllable Variance h-9 YCh< C
k 9l 4 Y9l -C= 9 K 9
.6
46 2K
5 ;,
>= Sd
Sales Variances0"
D
- ,-9l [ a 2% 7C KAm
3-1O2 < 3 3.< - C2% .K
- . >9 3 Y B-O V@O< 3
9 C % K 9 9.1. 9 6
. )6 9< 3. 9 >.- 3-C(
- ,- jk9l< 9 - 4 b2) 3 BC
59 3 C .3
-5
>9% % 3 . % 76 9.2
$ K% C BC=9 - $ BC
5 3$ 39
3] N 7 V@O 3-. ia
- Q9 Y . 3-. 9 Y< 3.% b

2C 3 ,% Y.K%
. YC ,C; < h--9 9.1. 9 6.
-9> 32 3 N N < 9 9.1.

= < 9 b2 3 K> ,C9 = 9.1 < 9K
) K 3C(3
< 5 < 9.1 K-$ -. <C Y $ ,% K% < 9 9.1. C 9Q$
) ,m < 3-.($ x3
- N 32 < 9 6. = < 9b
2 3k 369 Y 6 -. 6V@O
h
) K 9.2(i
< 5 9l = $) ,m 64 <. $ x b2 3- K%(
-9 >) 3-C (N4.= 9 >9 3 V< KN
Y < 9 6.=9 3..
-9 9.1. ) 9Q$ m (,m K9
6.) $=(,m= 9 < -C b23
)9Q$(,m
- ,-> 3-C h- % h 3m.3
l Y 9.1 V1 K
- V1 3-C l O2
YC 6l C [ >.
- < h- 9l > < , b9 6
9l < 9l l< 3 9l < 3-C3m
.3
- i>9 3 N Y6 < 95 9< .

6 . lT V< [C. = < 9
3 YC m <9 < > 3-C6 .3
-9 9.1. 6 . %2 h < 3
N ,C N] N` km)] N9l<(
- , 9m 3-. < 39 Y
a
- V1 9.29 -1 3-.< 3.1x
.3-.
- V1 9.29 -1 3-.< 3.1x
.
-9 6. 6 . %2 h< 3
N ,C - N j] N9l ` km
C , 9 Ya- . x 3-. V19 9 Yb
2 3 4 <.-.
- . x39 V19 9 Yb
2 3 4 ..
-9 6. 6 . % h]46 9
3. 9 > 3-C..
-9 3.
k 2 9 6. >9 3 N
9 Y b2 39 -1 3-.

.- b2 39 -1 . 3.%
<9 > 3-C. 39.3
3-1 2 k 9l 9 b23 9 Y , < N9 Y .
N- 39 32l 39 . 3-.
] N9l m
),2 9l >T ,C(99 9 Y . 3-.
. x 3.% V19 9 7 b2 3
-1 4 ..
-9 >) 3-C (N4.
< ,59 Y b2 39 4 < -.
3C6- 3-. 3
b2 39 4 . 3C3-.
6- .3
3-1 2 k 9l 9 b2 3 9 ,C x N9 Y
3-. N- 3 32l 39
3-. 3 36 ,9 m
< ,2 9l >T ,C9
C 9m 3-. x39 Y
V19 9 7 b2 3 4 .

V19 9 7 b2 3 4 <-.
5 ;,
- Y< j 9l 7 -C b2 3

9Q$),m9 9.1. 9Q-$,m9
6. ($,m
-9 6. % h]46a
9 3. % h]46 9 629 >)3 (3A>9 < 32.
-9 62
[ x - 9 b29- 3 Y 62 -.

62 K% <9 32>3
< 2 V19 9 7 b2 3 3
9 62
2 32> 3 < 3.%2) x 62 -.
- 62 K%( x V19 9
7 b2 3.
-9 > < 32
[ x - 9 b29- 3 32 Y>3
< 3-.2 32> 3 < 3.%2
<9 62 -. V19 9
7 b2 3 .3
9 > < 32=) 32> 3 < 3-.232-
> 3 < 3.%2( x 62 -.x
V19 9 7 b2 3
-5:
9 > 6 2 3-. ia
-9 V19 9 7 b2 3 $

9 62 9Q$,m
,m 9Q 9l [ $ x% x(-)]

% 2 6)
,m $ 2 3 >9-
3 ) >,m 9l( [ %-%) x$x]
. 2
,m 9Q$ . 3 9 <
(,m$-,m 9Q$)
S%)
Responsibility Accounting And
Performance
Measures
E
)
!E/0

)E=Responsibilty Centers :>=
<393-53499Q349:2]9<&)
.3:.29& 9.
-
93499.A C63@>C53:32>
&.3.<95
<&99.A<34C@22.3:3@399.<:&:&94)9(-
9.A7C@39:<C-.9539k9.A
7:&:94.
&934-.2C.>99C2@..k764) ,934l9349(
O17::..
Controllability-^
f
"
@k%9--C7&Ox-9>@39@79
99.
3Cx-9>{31C3`2.227C3.7.
al-.76.11xxC-99,5)9lBC51l(
& :3-CxC%7<9..7x<9.
5
3-C3:;9 9-..2l.<@9%.
3 .i%3-C9--C7<9>--C.
:-313`2>6AA943`2
)7-.-@m91l&.(36
9=C>76.6l<3:4-.9

9.362.<3:<9-11x<Cl.
Cost Center-=^8
943-C7<3A2-5VC.`2
-23-C23-A>
-.943-C3C&3-C
&:
5
&9=Cl7l`2C95C7l`223
1&53.lx479C319=Cl5C3
-
93-.&]2@6C-7-9-4=
&.
3-C32 5
-m3x297O2C.-394.3-C
-
94O3>-C-%C<9--AAO
3993:
94O39-5-.4.3-C
Revenue Center-=s
949l.2-5k949l.`2.V
29l23-A>{.--9.5
9=l.16
3&.79;2{.-2
Profit Center-=C
<2%&547<9l.`2C969A<.
Investment Center-='S/
94)519>9C-59l.`2C39A<1
952l
494)5127C.7943`29
x513-9-.-].51113.11y5O1
.,
-3Cx-9>@723113`2-
-
95%99-3-C%3`2-3<9.11> x
3-Cll3C9@27-;9:7--.%
3`2--1m3@-2Ck)31(3`<C
-=9:3`2T4lkx<>93.3
)62@(
-
GoalCongruence!%44.>-..6.7
) 3vlc2(
@x9-99<9:67-.77.C7
>x>6t9.66-]1)2.
%9Suboptimization-%/sUS
.@>93O9-7x3-A>9m7C3
9>-3.,C
>=S
Contribution And Segment
Reporting!E!
-%E
7->23<ax7-31973`2
-73Cx-9>
-5C3xCC7<9>95C-%yC9=C.
-7>2C%3957.-<A>9
)@mx7-.-9&6(
-3a3k7)&
3v-
>2 =KA{>3.-lC=9
>23=KA>2-KA{>3
9A<3.3=9
>a-=9A>23-KA5C%3x-3-9
=>a--9A
>@
5C33@
@&=>-
=>@ -9>C33
Segment-!
@N@3=9<3<393:-
-Cx-3-)9 (34.x>3%&.x&
) (BC3%9O9@37
S :^
R9'8))0
-
C7.>93<7.>x9/<9>:
5) 3KA.(
: 3-5xY<x-9@,l&
-
>97<2--.3297:.l
7.6<) ,-].51l(
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