 BUSINESS COMMUNICATION

 Lecture # 1
 THE IMPORTANCE OF ENGLISH IN BUSINESS
 What is Business English or English for Business?
 Why has the English language played a large part of a significant role in the world business today?
Read the excerpt then answer these questions:
 What have NICs done in the world of business?
 Do you think that what NICs have done in the world of business is logical, reasonable and practical?
 Which of these countries fare well in the business world—Singapore or the French-speaking African
countries? Explain why.
 English: The Global Language
(The Story of English, by Robert Mccrum et. al. 1992)
 The richest vocabulary
 The most widespread mother tongue.
 The most widespread second language.
 The official international language of the Third World.
 The language of communication and telecommunication.
 The language of Science and Computers.
 English: The Global Language
(The Story of English, by Robert Mccrum et. al. 1992)
 The language of the world.
 The language of the airwaves.
 The preferred language of Europe.
 The official language of Europe.
 The Need for Business English
 English has contributed much in the world’s production, trade and communication.
 D. Whitehead and G. Whitehead commented, “in life, economics is king, and everything else—literature,
music, art and even education—is only made possible by the business activity in the economic life of the
world.”
 The relevance of Business English as a subject should not be ignored. We all see the need to use English in
business situations—whether in everyday business life or during our employment.
 The Subject Areas of Business English
 Business English, the language of the international business world is simply ordinary English related
particularly to business use.
 Business English is not theoretical but a practical one at that. You need to learn to speak lucidly and
convincingly in everyday business conversation in the workplace, over the telephone, or in many other
different business situations—in the public address system, television camera, conferences, meetings, etc.
 Components of Business Communication
(Refer to the diagram)
 The Basic Forms of Organizational Communication
Directions: Fill in the blanks with appropriate words to complete each sentence’s thoughts and ideas.
______ communication is the process of
communicating without words. The most
basic of communication, it consists of
gestures, _____ expressions, spatial
relationships and attitudes. From primitive times to
the present modern time, we have used nonverbal
communication to express different emotions like
love, anger, dislike and other feelings.
There are limits to what we can
communicate without the use of words so we also
use the other form of communication--_____ that
consists of words arranged in meaningful patterns.
We arrange words according to the rules of
_____ in order to create thoughts. We transmit messages
in spoken or ______ form as we anticipate that someone
will either hear or read what is said or stated.
 Business Organizational Communication
 Business people manifest preference to oral communication channels than the written ones. For sharing
information on a daily basis, business people rely more heavily on oral than written communication.
 Communication is said to be the “glue” that binds the organization together. Without communication, the
organization will not just grow but will surely perish. It is very vital that the members of any specific
organization transmit the right information to the right people at the right time.
 Business Organizational Communication
 For the success and maintenance of an organization, organizational communications take place through
external and internal communication channels, which may move either downward or upward.
 Features or Organizational Communication
 EXTERNAL COMMUNICATION
  INTERNAL COMMUNICATION
 FORMAL COMMUNICATION NETWORK
 INFORMAL COMMUNICATION NETWORK
 HORIZONTAL INFORMATION FLOW
 UPWARD INFORMATION FLOW
 DOWNWARD INFORMATION FLOW

NONVERBAL COMMUNICATION
Introduction in Non-verbal Communication
Communication in general is process of sending and receiving messages that enables humans to share knowledge,
attitudes, and skills. Although we usually identify communication with speech, communication is composed of two
dimensions - verbal and nonverbal.
Non-verbal Communication
Nonverbal communication has been defined as communication without words. It includes apparent behaviors such
as facial expressions, eyes, touching, and tone of voice, as well as less obvious messages such as dress, posture and
spatial distance between two or more people.
nonverbal communication is learned shortly after birth and practiced and refined throughout a person’s lifetime.
Children first learn nonverbal expressions by watching and imitating, much as they learn verbal skills.
Young children know far more than they can verbalize and are generally more adept at reading nonverbal cues than
adults are because of their limited verbal skills and their recent reliance on the nonverbal to communicate. As
children develop verbal skills, nonverbal channels of communication do not cease to exist although become
entwined in the total communication process.
Humans use nonverbal communication because:
Words have limitations: There are numerous areas where nonverbal communication is more effective than verbal
(when explain the shape, directions, personalities are expressed nonverbally)
Nonverbal signal are powerful: Nonverbal cues primary express inner feelings (verbal messages deal basically with
outside world).
Nonverbal message are likely to be more genuine: because nonverbal behaviors cannot be controlled as easily as
spoken words.
Nonverbal signals can express feelings inappropriate to state: Social etiquette limits what can be said, but nonverbal
cues can communicate thoughts.
A separate communication channel is necessary to help send complex messages: A speaker can add enormously to
the complexity of the verbal message through simple nonverbal signals.
Nonverbal communication in classroom
Nonverbal communication is also a critical aspect of interpersonal communication in the classroom. The most
credible messages teachers generate, as communication sources are nonverbal.
Many of the cues students use to make judgments about teacher’s competence or characters are obtained by
observing the teacher’s nonverbal behavior.
Nonverbal communication in classroom
Nonverbal communication in the classroom occurs with distance, physical environment, facial expression, vocal
cues, body movements and gestures, touch, time, physical attractiveness, and dress.
BODY MOVEMENTS, GESTURES AND POSTURES
Movements and gestures by the hands, arms, legs, and other parts of the body and face are the most pervasive
types of nonverbal messages and the most difficult to control. It is estimated that there are over 200.000 physical
signs capable of stimulating meaning in another person (some social scientists state even 700.000). For example,
there are 23 distinct eyebrow movements, each capable of stimulating a different meaning.
BODY MOVEMENTS, GESTURES AND POSTURES
Humans express attitudes toward themselves and vividly through body motions and posture. Bodies movements
elucidate true messages about feeling that cannot be masked. Because such avenues of communication are visual,
they travel much farther than spoken words and are unaffected by the presence of noise that interrupt, or cancels
out speech.
People communicate by the way they walk, stand, and sit. We tend to be more relaxed with friends or when
addressing those of lower status.
Body orientation also indicates status or liking of the other individual. More direct orientation is related to a more
positive attitude.
BODY MOVEMENTS, GESTURES AND POSTURES
Body movements and postures alone have no exact meaning, but they can greatly support or reject the spoken
word. It these two means of communication are dichotomized and contradict each other, some result will be a
disordered image and most often the nonverbal will dominate.

Body movement and gesture in the classroom

Body postures and movements are frequently indicators of self-confidence, energy, fatigue, or status. In the
classroom, students keen to receive body message of enthusiasm or boredom about the subject matter being taught
can sense confidence or frustration from the unconscious behaviors of teachers.
Gestures
gestures operate to clarify, contradict, or replace verbal messages. Gestures also serve an important function with
regard to regulating the flow of conversation.
Gestures
For example, if a student is talking in class, single nods of the head from the teacher will likely cause that student to
continue and perhaps elaborate.
A sample gesture
Posture
used to indicate attitudes, status, affective moods, approval, deception, warmth, and other variables related to
classroom interaction.
conveys gross or overall affect (liking), while specific emotions are communicated by more discreet, facial and body
movements. (Ekman and Friesen)
Facial Expression
The saying “A picture is worth a thousand words” well describes the meaning of facial expression. Facial appearance
- including wrinkles, muscle tone, skin coloration, and eye color-offers enduring cues that reveal information about
age, sex, race, ethnic origin, and status.

Varieties of expressions

Face talks
Facial Expression
may be unintentional or intentional.
can also be voluntary, as when an individual wants deliberately to hide feelings for different reasons
Often people try to hide feelings and emotions behind masks.
All humans are capable of faking a happy or a sad face, a smile or a frown.
Facial Expression

Facial expression in the classroom

All people and thus certainly teachers and students use facial expressions to form impressions of another.
Facial expression involves some of the smallest body movements, but its impact in the classroom may be greater
than any other body language the teacher exhibits. The teacher probably communicates more accidentally by his or
her facial expression than by any other means.
When teachers are responding to students, these changes in facial expression can serve as reinforcers to the
student or as non-reinforcers.
Paralanguage
the study of nonverbal cues of the voice. Various acoustic properties of speech such as tone, pitch and accent,
collectively known as prosody, can all give off nonverbal cues.
may change the meaning of words
The linguist George L. Trager developed a classification system which consists of the voice set, voice qualities, and
vocalization.
The voice set is the context in which the speaker is speaking. This can include the situation, gender, mood, age and
a person's culture.
The voice qualities are volume, pitch, tempo, rhythm, articulation, resonance, nasality, and accent. They give each
individual a unique "voice print".
Vocalization consists of three subsections: characterizers, qualifiers and segregates. Characterizers are emotions
expressed while speaking, such as laughing, crying, and yawning. A voice qualifier is the style of delivering a
message - for example, yelling "Hey stop that!", as opposed to whispering "Hey stop that". Vocal segregates such as
"uh-huh" notify the speaker that the listener is listening.
Functions of nonverbal communication
Five primary functions of nonverbal bodily behavior in human communication:
Express emotions
Express interpersonal attitudes
To accompany speech in managing the cues of interaction between speakers and listeners
Self-presentation of one’s personality
Rituals (greetings)
Interaction of verbal and nonverbal communication
When communicating, nonverbal messages can interact with verbal messages in six ways: repeating, conflicting,
complementing, substituting, regulating and accenting/moderating.
Repeating
"Repeating" consists of using gestures to strengthen a verbal message, such as pointing to the object of discussion
Conflicting
Verbal and nonverbal messages within the same interaction can sometimes send opposing or
conflicting messages. A person verbally expressing a statement of truth while simultaneously fidgeting
or avoiding eye contact may convey a mixed message to the receiver in the interaction. Conflicting
messages may occur for a variety of reasons often stemming from feelings of uncertainty, ambivalence,
or frustration. When mixed messages occur, nonverbal communication becomes the primary tool
people use to attain additional information to clarify the situation; great attention is placed on bodily
movements and positioning when people perceive mixed messages during interactions.
Complementing
Accurate interpretation of messages is made easier when nonverbal and verbal communication complement each
other. Nonverbal cues can be used to elaborate on verbal messages to reinforce the information sent when trying to
achieve communicative goals; messages have been shown to be remembered better when nonverbal signals affirm
the verbal exchange
Substituting
Nonverbal behavior is sometimes used as the sole channel for communication of a message. People learn to identify
facial expressions, body movements, and body positioning as corresponding with specific feelings and intentions.
Nonverbal signals can be used without verbal communication to convey messages; when nonverbal behavior does
not effectively communicate a message, verbal methods are used to enhance understanding
Regulating
Nonverbal behavior also regulates our conversations. For example, touching someone's arm can signal
that you want to talk next or interrupt.
Accenting/Moderating
Nonverbal signals are used to alter the interpretation of verbal messages. Touch, voice pitch, and gestures are some
of the tools people use to accent or amplify the message that is sent; nonverbal behavior can also be used to
moderate or tone down aspects of verbal messages as well. For example, a person who is verbally expressing anger
may accent the verbal message by shaking a fist.
Dance and nonverbal communication
Dance is a form of nonverbal communication that requires the same underlying faculty in the brain for
conceptualization, creativity and memory as does verbal language in speaking and writing. Means of self-expression,
both forms have vocabulary (steps and gestures in dance), grammar (rules for putting the vocabulary together) and
meaning. Dance, however, assembles (choreographs) these elements in a manner that more often resembles
poetry, with its ambiguity and multiple, symbolic and elusive meanings.

 THE BARRIERS IN COMMUNICATION

 Read this two dialogs:
Scene 1
Manager: Excellent! So everything’s in perfect condition.
Secretary: The report is from our plant supervisor.
Manager: Business report, perfect report!
 Scene 2
Worker 1: Why has production stopped?
Worker 2: What will happen to us?
Worker 3: Why hasn’t the Manager responded to our needs? How long will we wait? Eternity?
Worker 4: How can this plant survive?
 Chaos Beneath Order
Questions:
 Is there a possibility for the scenario to be true?
 What problems could have occurred considering the written report submitted and the actual conditions of
the work place?
 How important is communication in a work place?
 Would you consider communication as the culprit of “chaos beneath order” in the work place cited?
 What is Communication?
 A process by which information is exchanged and understood by two or more people, usually with the intent
to motivate or influence behavior.
 Management communication is a two-way street that includes listening and other forms of feedback.
 What is Effective Communication?
When two people interact, they put themselves into each other’s shoes, try to perceive the world as
the other person perceives it, try to predict how the other will respond. Interaction involves reciprocal role-taking,
the mutual employment of empathetic skills. The goal of interaction is the merger of self and other, a complete
ability to anticipate, predict, and behave in accordance with the joint needs of self and other.
It is the desire to share understanding that motivates executives to visit employees on the shop floor
or eat breakfast with them. The things managers learn from direct communication with employees shape their
understanding of the corporation.
 Communication and the Manager’s Job
 Managers: 80% of working day is spent on direct communication with others; 20% is spent on doing desk
work.
 Communication permeates every management function.
 When managers lead, they communicate with subordinates to motivate them.
 When managers organize, they gather info about the state of the organization and communicate a new
structure to others.
 COMMUNICATION AND THE MANAGER’S JOB
 Two Levels of Barriers in Communication
 Barriers at the Individual Level
- Physical distraction
- Emotional interference
- Poor listening
- Cultural difference
- Differences in perception and language
 Organizational Barriers
Organizational barriers pertain to factors for the organization as a whole. First is the problem of
status and power differences. Low-power people may be reluctant to pass bad news up the hierarchy, thus giving
the wrong impression to upper levels. High-power people may not pay attention or may feel that low-status people
have little to contribute.
Second, differences across departments in terms of needs and goals interfere with communications.
Each department perceives problems in its own terms. The production dept is concerned with production efficiency
and may not fully understand the marketing department’s need to get the product to the customer in a hurry.
Third, the communication flow may not fit the team’s or organization’s task. If a centralized
communication structure is used for non-routine tasks, there will not be enough information circulated to solve
problems. The organization, dept, or team is most efficient when the amount of communication flowing among
employees fits the task.
Fourth, the absence of formal channels reduces communication effectiveness. Organizations must
provide adequate upward, downward, and horizontal communication in the form of employee surveys, open-door
policies, newsletters, memos, task forces, and liaison personnel. Without these formal channels, the organization
cannot communicate as a whole.
 How to Overcome Communication Barriers
 Climate of trust between the low-power people and high power people of an organization.
 Development and use of formal channels
 Changing organizational group structure to fit communication needs.
 Encouragement of multiple channels, formal and informal.
 Lesson next meeting:
Linguistic competence vs. discourse competence

 LINGUISTIC COMPETENCE
 What makes effective communication?
 Three important concerns of effective communication: content, format and the precise appropriate
adherence to the conventions of grammar and usage.
 One needs practice in building and combining basic sentence structures.
 The Basic Sentence Structures
 A sentence contains the basic parts: the subject (noun or pronoun) and the predicate (verb).
 Defined as a complete unit of thought.
 Does any of the following:
 Expresses a relationship
 Conveys a command
 Asks a question
 Describes someone or something
 Conveys a strong emotion
 Basic Sentence Structures
 S-TV-DO (subject-transitive verb-direct object)
 The object receives the action and usually follows the verb.
 Answers the questions who or what after the verb.
Examples:
1. Our professor wrote books in English.
2. He received an award for being an author.
 Exercise: Identifying subjects and objects
Directions: For each of the sentences below, encircle the subject, underline the verb and box the object.
1. Financial managers actively manage the financial affairs of a business.
2. They perform varied tasks: planning, extending credit to customers and raising money to fund the firm’s
operation.
3. The owners of a corporation are its stockholders.
4. You will learn the career opportunities in managerial finance.
5. Managerial finance and accounting are not often easily distinguishable.
 Sentence Combining Technique
 Combining sentences with adjectives and adverbs
Study how the following sentences may be combined:
Personal selling is a tool at certain stages of the buying process.
Personal selling is the most effective tool.
**Personal selling is the most effective tool at certain stages of the buying process.
 Sentence Combining Technique
 Combining details from three or more sentences
The agent explained clearly in the BOM (Business Opportunity Meeting).
The agent explained the marketing scheme.
The BOM was jampacked.
 How do you decide which is the best combination?
 Six considerations offered by Richard Nordquist (1991):
 Meaning:
 Clarity
 Coherence
  Emphasis
 Conciseness
 Rhythm
 Expanding and Building Sentences with Prepositional Phrases
 Prepositional acting phrases like adjectives and adverbs add meaning to nouns and verbs in a sentence.
Example:
The proprietor from Laguna arrived in the business meeting.
 Study these examples:
Before breakfast every morning, the proprietor reads the newspaper’s Business Section.
The proprietor reads the Business Section before breakfast in the lawn.
 Rules on Subject-Verb Agreement
 Be verbs change form from singular to the plural.
 In a sentence with compound subjects joined by and, the verb is plural unless the subjects are considered a
unit.
 In a sentence with compound subjects joined by or, nor, either….or, neither….nor, the verb usually agrees
with the closest subject.
 A singular subject followed by a phrase introduced by as well as, together with, along with, in addition to
ordinarily takes a singular verb.
 Collective nouns (committee, jury, crowd, team, etc) usually take a singular verb.
 Rules on Subject-Verb Agreement
 When a collective noun refers to members of the group individually, a plural is used.
 Expressions signifying quantity or extent (kilometers, years, etc.) take singular verbs when the amount is
considered as a unit.
 A singular subject followed by a phrase or clause containing plural nouns is still singular.
 When a sentence begins with there is or there are, the verb is determined by the subject which follows.
 A verb agrees with its subject and not with its complement.
 Rules on Pronoun Agreement
 A pronoun must agree in number with the word for which it stands, its antecedent.
 When a pronoun’s antecedent is a collective noun, the pronoun may either be singular or plural, depending
on the meaning of the noun.
 For nouns joined by or or nor, the pronoun agrees with the nearer noun.
 When an antecedent is a common-gender noun (customer, manager, instructor, supervisor, employee, etc.),
the traditional practice has been to use he and his.
 Those who are sensitive to sexist elements of language are more prone to use both his or her if the gender
of the antecedent is not known.
 Rules on Pronoun Agreement
 “His” or “her” repeated many times can be cumbersome, so to avoid this, use a plural construction.
 Some indefinite pronouns (some, all, none, any, etc.), used as antecedent require singular or plural
pronouns, depending on the meaning of the statement.
 All, any, some or most are either singular or plural, depending on the meaning of the statement.
 In standard English usage, “none” is usually singular unless the meaning is clearly plural.
 A pronoun when used must always have a clearly identified antecedent.
 Irregular Verbs
 Irregular verbs do not end in –d or –ed in the past tense. Their ending may be different from those of regular
verbs, but they rely on the same helping verbs that indicate present, past and future time.
 Irregular verbs work the same way as regular verbs do; the only difference is their endings.
Examples:
The meeting was supposed to begin at nine. It actually (begin) at nine.
The meeting began at nine. I wished it had (begin) earlier.

 VOCABULARY SKILLS
 VOCABULARY STRATEGIES – deducing word meanings without the use of the dictionary
 CONTEXT CLUES – hints provided by the words and sentences surrounding the unfamiliar words
 STRUCTURAL ANALYSIS
 Word part clues/word origin
 Forming new words by combining prefixes, suffixes and roots
 Examples
 Context clues to word meanings
Nine bomb blast went off simultaneously in Belfast and five other cities: Newry on the border, Armagh;
Londonderry; Portadown, the industrial city, and Lisburn, the Protestant northern enclave.
Which words in the sentence above serve as clues that may enable you to arrive at the meaning of went off?
of simultaneously?
 Examples:
 Structural Analysis
  Word origin
Yacht Dutch
Canoe West Indian
Buffalo Spanish
Silk Chinese
Alcohol Arabic
Poodle German
Chauffeur French
Opera Italian
 Word Origin
 Sample:
ignis – means fire
ignite, ignition, igneous rocks
 Complete the word chart by writing the correct forms of words. If there is no equivalent form, write X.
 Building Business Communication Vocabulary
1. Record the word whether you have time or not to get its meaning and the date you recorded it.
2. Use a dictionary to find its meaning. There may be several meanings. Choose the one that best fits the
sense in which you encountered the word.
3. You can also record acronyms, which are part of the modern world jargon.
 Building Business Communication Vocabulary
4. Once you have recorded the meanings, use the word in your own sentences. You may also record the
sentence from which you have found the word.
Example:
Meaning: JIT – just in time
Original sentence: The whole philosophy of JIT argues that business should arrange their affairs so that they get
everything just in time.
Your own sentence: JIT lowers costs and raises the return on capital investment.

THE FACE-TO-FACE COMMUNICATION SKILLS

Principles of Face-to-Face Communication
Business will not flourish without communication
There is an urgent need for face-to-face communication in offices or work places.
Good interpersonal communication skills are a necessity whether in a lower or higher levels of a company
Here are some tips you should consider to strive for competence in face-to-face business situations:
Getting detailed preparation
 The best way to prepare for a f-t-f communication is to get all the pertinent details ahead of the
business event.
 You must have everything you need to know about the subject on which you are to address the
individual, group or mass meeting.
 Gather all relevant details and arrange them in a coherent organized presentation. Remember to
make notes of any significant points.
Planning for the actual presentation
 You need to consider important things—certain courtesies like welcoming the audience and thanking
them for their support and attendance, if necessary.
 You might need to introduce some of the people present in a clear, organized way.
 Have presence of mind in considering all the events to take place in the said business occasion. A
set of note cards might be of help to keep you on the right track.
Performing in the actual delivery
 Remember to be brisk and businesslike. Don’t go slow or hesitating in your presentation; rather,
exude confidence and mastery in whatever part you’ll undertake.
 Also don’t forget to allow time for clarification in the form of questions at the end of the talk.
 Remember that people may give false nonverbal cues.
 Smile genuinely. Don’t fake it as one that is not sincere will be noticed.
 Improve your nonverbal skills. Pay attention to your and others’ cues as well.
 Appropriate distance should be maintained. Use touch only when appropriate.
 Adopt a handshake that matches your personality and intention.
 Have eye contact that is appropriate to the situation.
 Use gestures and facial expressions to emphasize important points.
 Practice to think before you speak.
 Learn to enhance your ability to listen as this is a vital skill in business.
TIPS IN GIVING INSTRUCTIONS
Three major considerations as suggested by Whitehead and Whitehead.
The context or situation where instructions are to be given.
The nature of instructions
The need for practice or recapitulation
 The situation
 Secure the full attention of those being instructed.
  Give them time to gather around you and it’s worth waiting for reasonable silence because perfect
silence might not be attainable.
 Speak up loud and clear. When you can’t be heard by the large group you’re addressing, use a loud
hailer or any form of public address system.
 If you’re talking to younger people or new employees, give instructions in a more simple way. Go
over your instructions more than once.
 The Nature of Instruction
 What kind of instructions are you going to give? You need to focus on what has to be said and to
enumerate the items or points of your instructions in a clear and correct sequence.
 Prepare a list of the important points on a black or white board. The board visual invites attention so
that you and your audience keep to the topic.
 Go through the items one by one and interspersed, invite questions on each point to clear out doubts
and uncertainties along the way. But don’t delay and ignore time wasting irrelevant questions. If
need be, give warnings of hazards.
COST ACCOUNTING
Costs Terms, Concepts and Classifications
Chapter Two
Manufacturing Costs
Direct Materials
Raw materials that become an integral part of the product and that can be conveniently traced
directly to it.
Direct Labor
Those labor costs that can be easily traced to individual units of product.
Manufacturing Overhead
Manufacturing costs that cannot be traced directly to specific units produced.
Classifications of Costs
Manufacturing costs are often
classified as follows:
Non-manufacturing Costs
Product Costs Versus Period Costs
Product costs include direct materials, direct labor, and manufacturing overhead.
Period costs include all marketing or selling costs and administrative costs.
Quick Check ü
Which of the following costs would be considered a period rather than a product cost in a
manufacturing company?
A. Manufacturing equipment depreciation.
B. Property taxes on corporate headquarters.
C. Direct materials costs.
D. Electrical costs to light the production
facility.
E. Sales commissions.
Quick Check ü
Which of the following costs would be considered a period rather than a product cost in a
manufacturing company?
A. Manufacturing equipment depreciation.
B. Property taxes on corporate headquarters.
C. Direct materials costs.
D. Electrical costs to light the production
facility.
E. Sales commissions.
Comparing Merchandising and Manufacturing Activities
Merchandisers . . .
Buy finished goods.
Sell finished goods.
Manufacturers . . .
Buy raw materials.
Produce and sell finished goods.
Balance Sheet
Merchandiser
Current assets
 Cash
 Receivables
 Prepaid Expenses
 Merchandise Inventory
Balance Sheet
Merchandiser
Current assets
 Cash
 Receivables
 Prepaid Expenses
  Merchandise Inventory
The Income Statement
Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers.
Inventory Flows
Quick Check ü
If your inventory balance at the beginning of the month was $1,000, you bought $100 during the
month, and sold $300 during the month, what would be the balance at the end of the month?
A. $1,000.
B. $ 800.
C. $1,200.
D. $ 200.
Quick Check ü
If your inventory balance at the beginning of the month was $1,000, you bought $100 during the
month, and sold $300 during the month, what would be the balance at the end of the month?
A. $1,000.
B. $ 800.
C. $1,200.
D. $ 200.
Schedule of Cost of Goods Manufactured
Product Cost Flows
Product Cost Flows
Product Cost Flows
Product Cost Flows
Product Cost Flows
Manufacturing Cost Flows
Quick Check ü
Beginning raw materials inventory was $32,000. During the month, $276,000 of raw material was
purchased. A count at the end of the month revealed that $28,000 of raw material was still present.
What is the cost of direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2,000
Quick Check ü
Beginning raw materials inventory was $32,000. During the month, $276,000 of raw material was
purchased. A count at the end of the month revealed that $28,000 of raw material was still present.
What is the cost of direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2,000
Quick Check ü
Direct materials used in production totaled $280,000. Direct labor was $375,000 and factory
overhead was $180,000. What were total manufacturing costs incurred for the month?
A. $555,000
B. $835,000
C. $655,000
D. Cannot be determined.
Quick Check ü
Direct materials used in production totaled $280,000. Direct labor was $375,000 and factory
overhead was $180,000. What were total manufacturing costs incurred for the month?
A. $555,000
B. $835,000
C. $655,000
D. Cannot be determined.
Quick Check ü
Beginning work in process was $125,000. Manufacturing costs incurred for the month were
$835,000. There were $200,000 of partially finished goods remaining in work in process inventory at
the end of the month. What was the cost of goods manufactured during the month?
A. $1,160,000
B. $ 910,000
C. $ 760,000
D. Cannot be determined.
Quick Check ü
Beginning work in process was $125,000. Manufacturing costs incurred for the month were
$835,000. There were $200,000 of partially finished goods remaining in work in process inventory at
the end of the month. What was the cost of goods manufactured during the month?
A. $1,160,000
B. $ 910,000
C. $ 760,000
D. Cannot be determined.
Quick Check ü
Beginning finished goods inventory was $130,000. The cost of goods manufactured for the
month was $760,000. And the ending finished goods inventory was $150,000. What was the cost of
goods sold for the month?
A. $ 20,000.
B. $740,000.
C. $780,000.
D. $760,000.
Quick Check ü
Beginning finished goods inventory was $130,000. The cost of goods manufactured for the
month was $760,000. And the ending finished goods inventory was $150,000. What was the cost of
goods sold for the month?
A. $ 20,000.
B. $740,000.
C. $780,000.
D. $760,000.
Cost Classifications for Predicting Cost Behavior
How a cost will react to changes in the level of activity within the relevant range.
Total variable costs change when activity changes.
Total fixed costs remain unchanged when activity changes.
Total Variable Cost
Your total long distance telephone bill is based on how many minutes you talk.
Variable Cost Per Unit
The cost per long distance minute talked is constant. For example, 10 cents per minute.
Total Fixed Cost
Your monthly basic telephone bill probably does not change when you make more local calls.
Fixed Cost Per Unit
The average fixed cost per local call decreases as more local calls are made.
Cost Classifications for Predicting Cost Behavior
Quick Check ü
Which of the following costs would be variable with respect to the number of cones sold at a
Baskins & Robbins shop? (There may be more than one correct answer.)
A. The cost of lighting the store.
B. The wages of the store manager.
C. The cost of ice cream.
D. The cost of napkins for customers.
Quick Check ü
Which of the following costs would be variable with respect to the number of cones sold at a
Baskins & Robbins shop? (There may be more than one correct answer.)
A. The cost of lighting the store.
B. The wages of the store manager.
C. The cost of ice cream.
D. The cost of napkins for customers.
Assigning Costs to Cost Objects
Direct costs
Costs that can be
easily and conveniently traced to a unit of product or other cost object.
Examples: direct material and direct labor
Indirect costs
Costs that cannot be easily and conveniently traced to a unit of product or other cost object.
Example: manufacturing overhead
Cost Classifications for Decision Making
Every decision involves a choice between at least two alternatives.
Only those costs and benefits that differ between alternatives are relevant in a decision. All other costs
and benefits can and should be ignored.
Differential Costs and Revenues
Costs and revenues that differ among alternatives.
Opportunity Costs
The potential benefit that is given up when one alternative is selected over another.
Sunk Costs
Sunk costs have already been incurred and cannot be changed now or in the future. They should be
ignored when making decisions.

Quick Check ü
Suppose you are trying to decide whether to drive or take the train to Portland to attend a
concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the cost
of the train ticket relevant in this decision? In other words, should the cost of the train ticket affect the
decision of whether you drive or take the train to Portland?
A. Yes, the cost of the train ticket is relevant.
B. No, the cost of the train ticket is not relevant.
Quick Check ü
Suppose you are trying to decide whether to drive or take the train to Portland to attend a
concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the cost
of the train ticket relevant in this decision? In other words, should the cost of the train ticket affect the
decision of whether you drive or take the train to Portland?
A. Yes, the cost of the train ticket is relevant.
B. No, the cost of the train ticket is not relevant.
Quick Check ü
Suppose you are trying to decide whether to drive or take the train to Portland to attend a
concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the
annual cost of licensing your car relevant in this decision?
A. Yes, the licensing cost is relevant.
B. No, the licensing cost is not relevant.
Quick Check ü
Suppose you are trying to decide whether to drive or take the train to Portland to attend a
concert. You have ample cash to do either, but you don’t want to waste money needlessly. Is the
annual cost of licensing your car relevant in this decision?
A. Yes, the licensing cost is relevant.
B. No, the licensing cost is not relevant.
Quick Check ü
Suppose that your car could be sold now for $5,000. Is this a sunk cost?
A. Yes, it is a sunk cost.
B. No, it is not a sunk cost.
Quick Check ü
Suppose that your car could be sold now for $5,000. Is this a sunk cost?
A. Yes, it is a sunk cost.
B. No, it is not a sunk cost.
Summary of the Types of Cost Classifications
Financial reporting
Predicting cost behavior
Assigning costs to cost objects
Decision making
Idle Time
Overtime
Labor Fringe Benefits
Quality of Conformance
Prevention and Appraisal Costs
Internal and External Failure Costs
Examples of Quality Costs
Distribution of Quality Costs
Quality Cost Reports: Graphic Form
Uses of Quality Cost Information
Limitations of Quality Cost Information
ISO 9000 Standards