INTRODUCTION TO MANAGEMENT ACCONTING
OVERRATE PLC
Management meeting
Small, medium or large companies, have one thing in common, make profit, and to make profit we need to make sure that the income has covered all the costs.
There are two types of costs, the direct ones, which are easy to identify as they are “directly” referred, linked to the product or service, which can be traced directly, straight and fully to the product, (e.g. material cost, labour cost, direct expenses, which are known as prime cost as well), generally, direct cost are considered, variable cost, as the cost increase when quantity/output increases, and indirect cost (overheads), which are not directly related with the production, but they are needed to proceed with the production, for example, in a coat manufacturing company, the leather is seen as direct cost, because is a prime material needed for the production, and traceable, while, for example, light and heating are not directly part of the final coat, but they were still necessary in order to finish the product, indirect cost are considered fix cost, as they do not change, if the production quantity increases or decreases.
So the reason why, companies normally charge indirect costs in addition to the direct ones, is to determine the total cost per unit (known as absorption), for then decide a selling price, so the income can cover all the expenses, thus generate profit.
Absorption costing: “means that all of the manufacturing cost are
Direct labor assembly costs are, by their nature, directly traceable to individual products. Therefore the relevant cost driver for this cost is the number of Direct Assembly Labor Hours. The other 21 cost categories are indirect costs.
Note: Final Sign Off can only be done when the student has completed both theory and practical components of the unit. (Please attach evidence of theory and practical at the back of the coversheet)
Into which of the three elements of manufacturing cost would each of the following be classified? (Direct Labor, Direct Materials, and Manufactured Overhead)
However the trading account is used to see whether the material costs and direct expenses are covered or not. Material costs means the price of the items used to produce the goods for the sale. Direct Expenses means the expenses are linked to the production to make the goods for a profitable purpose. In the trading, profit and loss account for smiths the material costs are motor expenses which are £9,622 while the direct expenses is Electricity which costs £7,400.
Direct material costs change due to the quantity, range, quality and price of materials required according to the specification for the order each time a unit of the product or service is produced. Direct labour costs are driven by the number of hours required and the rate per hour each product unit that has been set for each labour grade.
According to this method, every unit of the product is assigned all direct, fixed, and variable costs. This method includes the cost of direct materials and labor as well as a portion of the overhead costs associated with it in the final costing of every unit of the product.
unit, two types of costs are distinguished. Firstly the direct costs, consisting of the direct
Management has experienced remarkable shifts in the way that organizations conduct business particularly in the last century, due to the evolving workplace as well as tremendous changes in the roles of leaders in organizations. Early managers often relied on authoritative tactics to get the job done, which we have learned from history does not work very well for many modern organizations. In this paper, I will be analyzing the management approach my organization takes and whether this is the best approach to meet organizational goals and whether or not my organization may benefit from adopting a different approach or combining multiple approaches.
price v. indirect costs such as: training and relocation costs. One could see it beneficial to also contemplate about costs the initial costs equally obvious direct in addition to indirect
Variable Costing: Only those costs of production that vary directly with activity (variable costs) are treated as product costs. Under variable costing, only the variable manufacturing costs are included as a part of the cost of the product manufactured. The fixed manufacturing costs are treated as an expense of the period in which they are incurred. Selling and administrative costs
A direct cost can be traced to a product or service which includes: Direct labor- which is the cost of the labor that’s directly connected to a product or services. Direct labor is sometimes called touch labor, since direct labor workers typically touch the product while it is being made.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 39-40) An example of direct labor is an assembly line worker. Labor cost that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience, are considered to be indirect labot.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 40) Direct material are those materials that become an integral part of the finished product and whose cost can be traced to the finished product.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p39-40) Manufacturing overhead is the third element so manufacturing cost, it includes all costs of manufacturing except direct materials and direct labor. Manufacturing overhead includes items such as indirect materials; indirect labor; maintenance and repairs on production equipment; and heat and light, property taxes, depreciation, and insurance on manufacturing facilities. Only cost associated with operating the factory are consider to be manufacturing overhead cost. A company also incurs other costs associated with its selling administive functions, but these costs are not included as part of manufacturing overhead. Only those
Product costs can be used both as “cost of goods manufactured” when the companies are incurring goods and as a “Cost of goods Sold” when the companies are selling the goods. Direct material cost includes all the cost that are used in the manufacturing of product; direct labor cost includes the cost of the labor that are physically in touch with product manufacturing and manufacturing overhead includes the cost other than direct material and labor cost like indirect materials, indirect labor, factory equipment depreciation. In manufacturing company’s balance sheet current assets of inventory includes cost of raw materials, work in progress and finished goods. Period Costs in manufacturing companies will include sales commissions, advertising costs, office salaries, property taxes, research and development, insurance, depreciation, selling
Direct Costs: costs that can be easily and conveniently traced to the particular cost object under consideration. To be traced to a cost object, such as a product, the cost must be caused by the cost object.
Direct costs are costs directly related to producing the products and services of a project. On the other hand, indirect costs are costs not directly related to a project’s products or services, but are indirectly related to performing the project.
The main focus behind the development of management theory is the quest for good ways to make use of managerial means. Management theory evolves constantly with the continuous stream of new ideas that come from the attempts to transform theory into practice, and vice versa (Aguinaldo & Powell, 2002). Progression in management theory normal happen as key personnel discover great methods to accomplish the most important management responsibilities: planning, organiz-ing, leading, and controlling human and other managerial means. This paper will show how man-agement theory having to do with suitable management processes has emerge in modern times, and view the main aspects that have led to its prosperity.