Hershey Chocolates- Cost Classifications

Essay by amiblueUniversity, Bachelor's August 2009

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Table of ContentsIntroduction1Part 111.1 Product Chosen - Hershey's Kisses.11.2 Cost Classification21.3 Explanations3Part 252.1 Production process.52.2 Type of product costing - Process costing62.3 Differences between management accounting (MA) and financial accounting (FA) - cost of inventory7Part 38References10Appendices12IntroductionThe Hershey Company (Hershey) was the chosen listed manufacturing company which to be discussed in this assignment. They are the largest North American manufacturer of quality chocolate and sugar confectionery products (The Hershey Company, 2009a).

Part 11.1 Product Chosen - Hershey's Kisses.

Hershey's Kisses are a type of chocolate manufactured by The Hershey Company. The bite-sized pieces of chocolate have a flat-bottomed teardrops shape. Hershey's Kisses are wrapped in squares of lightweight aluminum foil with a narrow strip of paper protruding from the top.

1.2 Cost ClassificationBasis of classificationCost classificationsDefinitionsBehaviourFixed costsCosts remain unchanged in total despite changes in the level of activity.

Variable costsChange in total cost in direct proportion to a change in the level of activity.

Curvilinear costsHas a curved cost line, but is often approximated as a semi variable cost functionTraceability DirectCosts that can be traced to a particular responsibility centre are direct costs of that centreIndirectCosts that relate to responsibility centres, but cannot be traced precisely to specific responsibility centres are indirect costs of those centresControllabilityControllableCosts that are influenced by the decisions or actions of a managerUncontrollableCosts that are not influenced by the decisions or actions of a managerValue chainUpstream-Research and development costs , Design costs, Supply costsManufacturing/ productionAll costs involved in the acquiring of raw materials to the delivery of finished goods to the warehouse.

Downstream-Marketing costs , Distribution costs, Customer service costsManufacturing/ product costsDirect material-Material that is consumed in the manufacturing processDirect labour-The cost of wages and labour on-costs of staff who work directly on manufacturing a productManufacturing overhead-All manufacturing costs other than...