亨格瑞成本与管理会计（第16版） 课件Chapter 9 Inventory Costing and Capacity Analysis

CostAccountingSeventeenthEdition,GlobalEditionChapter9InventoryCostingandCapacityAnalysisCopyright©2021PearsonEducationLtd.LearningObjectives(1of2)9.1Identifywhatdistinguishesvariablecostingfromabsorptioncosting9.2Computeincomeunderabsorptioncostingandvariablecostingandexplainthedifferenceinincome9.3Understandhowabsorptioncostingcanprovideundesirableincentivesformanagerstobuildupinventory9.4Differentiatethroughputcostingfromvariablecostingandabsorptioncosting

9.5DescribethedifferentcapacityconceptsthatcanusedinabsorptioncostingLearningObjectives(2of2)9.6Examinethekeyfactorsmanagersusetochooseacapacityleveltocomputethebudgetedfixedmanufacturingcostrate9.7UnderstandissuesthatplayanimportantroleincapacityplanningandcontrolChapterOverviewInventory-Costing

ThetwomostcommonmethodsofcostinginventoryinmanufacturingcompaniesareVARIABLEcostingandABSORPTIONcosting.Thechoicedetermineswhichmanufacturingcostsaretreatedasinventoriablecosts.Denominator-LevelCapacity

Givenafirm’slevelofspendingonfixedmanufacturingcosts,whatcapacitylevelshouldmanagersandaccountantsusetocomputethefixedmanufacturingcostperunitproduced?InventoryCostingChoices:

OverviewVariablecostingisamethodofinventorycostinginwhichallvariablemanufacturingcosts(directandindirect)areincludedasinventoriablecosts.Absorptioncostingisamethodofinventorycostinginwhichallvariableandfixedmanufacturingcostsareincludedasinventoriablecosts.Youcansaythatinventory“absorbs”allmanufacturingcosts.Throughputcostingisamethodofinventorycostinginwhichonlydirectmaterialsareincludedasinventoriablecosts.Allothercostsareexpensed.InventoryCosting:DifferencesinIncomeOperatingincomewilldifferbetweenabsorptionandvariablecostingifinventorylevelschangebecauseofthedifferenceinaccountingforfixedmanufacturingcosts.Theamountofthedifferencerepresentstheamountoffixedmanufacturingcostscapitalizedasinventoryunderabsorptioncostingandexpensedasaperiodcostundervariablecosting.ComparingIncomeEffectsofVariableandAbsorptionCosting—Yr.1Exhibit9.1ComparisonofVariableCostingandAbsorptionCostingforStassenCompany:TelescopeProduct-LineIncomeStatementsfor2020ComparingIncomeEffectsofVariableandAbsorptionCosting—Yrs.1&2Exhibit9.2ComparisonofVariableCostingandAbsorptionCostingforStassenCompany:TelescopeProduct-LineIncomeStatementsfor2020and2021ComparativeIncomeEffectsVariableandAbsorptionCostingExhibit9.3ComparativeIncomeEffectsofVariableCostingandAbsorptionCostingAbsorptionCostingandPerformanceMeasurement(1of2)Absorptioncostingistherequiredinventorymethodforexternalfinancialreportinginmostcountries.Absorptioncostingispreferredforseveralreasons:Itiscost-effectiveandlessconfusing.Itcanhelppreventmanagersfromtakingactionsthatmaketheirperformancemeasurelookgoodbutthathurttheincometheyreporttoshareholders.Itmeasuresthecostofallmanufacturingresources(variableorfixed)necessarytoproduceinventory.AbsorptionCostingandPerformanceMeasurement(2of2)Animportantattributeofabsorptioncostingisthatitenablesamanagertoincreasemarginsandoperatingincomebyproducingmoreendinginventory.Producingforinventoryisjustifiedwhenafirm’smanagersanticipaterapidgrowthindemandandwanttoproduceandstoreadditionalunitstodealwithpossibleproductionshortagesinthenextyear.ProposalsforRevisingPerformanceEvaluationManagementhasseveraloptionstoreducetheundesirableeffectsofabsorptioncosting:FocusoncarefulbudgetingandinventoryplanningIncorporateaninternalcarryingchargeforinventoryChange(lengthen)theperiodusedtoevaluateperformance.Includenonfinancialaswellasfinancialvariablesinthemeasurestoevaluateperformance(compareratioofending/beginninginventorytoratioofunitsproduced/sold)ExtremeVariableCosting:ThroughputCostingThroughputcosting(super-variablecosting)isamethodofinventorycostinginwhichonlydirectmaterialcostsareincludedasinventorycosts.Allotherproductcostsaretreatedasperiodexpenses.Throughputmarginequalsrevenuesminusalldirectmaterialcostofthegoodssold.ThroughputCostingIllustratedExhibit9.5ThroughputCostingforStassenCompany:TelescopeProduct-LineIncomeStatementsfor2020and2021AlternativeInventory-CostingSystemsComparedExhibit9.6ComparisonofAlternativeInventory-CostingSystemsCapacityConcepts—Denominator-LevelCapacityOverviewGivenafirm’slevelofspendingonfixedmanufacturingcosts,whatcapacitylevelshouldmanagersandaccountantsusetocomputethefixedmanufacturingcostperunit?Wehaveseenthatthedifferencebetweenvariable-andabsorption-costingmethodsarisessolelyfromthetreatmentoffixedmanufacturingcosts.Spendingonfixedmanufacturingcostsenablesfirmstoobtainthescaleorcapacityneededtosatisfytheexpectedmarketdemandfromcustomers.Determiningthe“right”amountofspending,ortheappropriatelevelofcapacity,isoneofthemoststrategicandmostdifficultdecisionsmanagersface.DenominatorLevelCapacity—ConceptsToomuchcapacitymeansfirmswillincurthecostofunusedcapacity;havingtoolittlemeansthatdemandfromsomecustomersmaybeunfulfilled.Inbusinessandaccounting,capacityordinarilymeansa“constraint”oran“upperlimit.”Thechoiceofthecapacitylevelusedtoallocatebudgetedfixedmanufacturingcoststoproductscangreatlyaffectoperatingincome.CapacityLevelsFourdifferentcapacitylevelscanbeusedasthedenominatortocomputethebudgetedfixedmanufacturingcostrate:TheoreticalcapacityPracticalcapacityNormalcapacityutilizationMaster-budgetcapacityutilizationTheoreticalCapacityTheoreticalcapacityisthelevelofcapacitybasedonproducingatfullefficiencyallthetime.Itistheoreticalinthesensethatitdoesnotallowforanyslowdownsduetoplantmaintenance,shutdownperiods,orinterruptionsbecauseofdowntimeontheassemblylines.Theoreticalcapacitylevels,intherealworld,areunattainable,buttheyrepresenttheidealgoalofcapacityutilizationacompanycanaspireto.PracticalCapacityPracticalcapacityisthelevelofcapacitythatreducestheoreticalcapacitybyconsideringunavoidableoperatinginterruptionslikescheduledmaintenancetimeandshutdownsforholidays.Boththeoreticalcapacityandpracticalcapacitymeasurecapacitylevelsintermsofwhataplantcansupply.Ournexttwolevelsmeasurecapacitylevelsintermsofdemand.NormalCapacityUtilizationandMaster-BudgetCapacityUtilizationNormalcapacityutilizationisthelevelofcapacityutilizationthatsatisfiesaveragecustomerdemandoveraperiodthatislongenoughtoconsiderseasonal,cyclical,andtrendfactors.Master-budgetcapacityutilizationisthelevelofcapacityutilizationthatmanagersexpectforthecurrentbudgetperiod,whichistypicallyoneyear.EffectsofCapacityLevelsonBudgetedFixedManufacturingCostRateThechoiceofcapacitylevelcanhaveahugeimpactonbudgetedfixedmanufacturingcostperunitasshownhere:Itispossibleandevenlikelythatbudgeteddemandwillbebelowproductioncapacitylevels.ChoosingaCapacityLevelThechoiceofdenominator-levelcapacitytousemaydifferbasedonthepurposeforwhichthechoiceisbeingmade.Someofthosepurposesincludethefollowing:ProductcostingandcapacitymanagementPricingPerformanceevaluationExternalreportingTaxrequirementsProductCostingandCapacityManagementForproductcostingandcapacitymanagement,usingpracticalcapacityasthedenominatorlevelsetsthecostofcapacityatthecostofsupplyingthecapacity,regardlessofdemandforthecapacity.Highlightingthecostofcapacityacquiredbutnotuseddirectsmanagers’attentiontowardmanagingunusedcapacity.Incontrast,usingeitherofthecapacitylevelsbasedondemandhidestheamountofunusedcapacity.PricingDecisionsTounderstandthebestchoiceforpricingdecisions,let’slookfirstatthedownwarddemandspiralforacompany.Itisthecontinuingreductioninthedemandforitsproductsthatoccurswhencompetitorpricesarenotmet;demanddropsfurther,andthefixedcostsarespreadoverfewerunits,resultingingreaterandgreatercostsperunit.Practicalcapacity,bycontrast,isamorestablemeasurebecauseitcalculatesthefixedcostratebasedoncapacityavailableratherthancapacityusedtomeetdemand.PerformanceEvaluationUnusedcapacityaddscoststoproducts.Mid-levelmanagershavenocontroloverthosecostsbutdohavecontroloverprices.Shouldthemarketingmanagersbeheldaccountableforthemanufacturingoverheadcostsunrelatedtotheirpotentialcustomerbase(practicalcapacityversusmaster-budgetcapacityutilization)?Wheredifferencesbetweenpracticalcapacityandmaster-budgetcapacityutilizationarelarge,thatdifferenceisoftenclassifiedasplannedunusedcapacity.FinancialReporting(1of2)Themagnitudeofthefavorable/unfavorableproduction-volumevarianceunderabsorptioncostingisaffectedbythechoiceofthedenominatorlevelusedtocalculatethebudgetedfixedmanufacturingcostperunit.RecallfromChapter4thattheproduction-volumevariancecanbedisposedofthreeways:Adjustedallocation-rateapproach(recalculateatyearend)Prorationapproach(spreadtoWork-in-Process,FinishedGoods,andCostofGoodsSold)Write-offtoCostofGoodsSold.FinancialReporting(2of2)Theobjectiveinchoosingthemethodtodisposeoftheproduction-volumevarianceistowrite-offtheportionofthevariancethatrepresentsthecostofcapacitynotusedtosupporttheproductionofoutputduringtheperiod.Recallthattheproduction-volumevariance=Budgetedfixedmanufacturingoverhead–Fixedmanufacturingoverheadallocatedusingbudgetedcostperoutputunitallowedforactualoutputproduced.EffectsofCapacityLevelsonIncomeStatementExhibit9.7Income-StatementEffectsofUsingAlternativeCapacity-LevelConcepts:StassenCompanyfor2020TaxRequirementsFortaxreportingpurposesintheUnitedStates,theInternalRevenueService(IRS)requirescompaniestoassignin