ACCT2522 Management Accounting 1 Session 1, 2013 Tutorial Week 3 – Cost basics Overall Theme We will explore fundamental assumptions of cost functions and discuss the relationships between cost behaviour, cost estimation and cost prediction. The concept of cost driver analysis and its application to cost estimation and cost management will also be discussed. We will also describe how to estimate cost behaviour using managerial judgment, engineering methods and other quantitative techniques. Desired Learning Outcomes and Essential Reading Langfield-Smith, K., H. Thorne, and R. W. Hilton (2012). Management Accounting 6e: Information for Managing and Creating Value, 6th ed, McGraw-Hill Australia Pty Ltd. (Hereafter referred to as LS) …show more content…
Suggest a potential cost driver 2. Classify the cost as manufacturing or non-manufacturing 3 Self Study Questions and Solutions (complete in your own time) 1. 2. 3. 4. LS, Chapter 2, Self-Study problem 1. LS, Chapter 2, Review Question 2.7 LS, Chapter 3, Question 3.34. Mowen, Chapter 3, Question 3.10. (Note: You are not required to run a regression, the output table is provided below. 4 Self Study Questions and Solutions (complete in your own time) 1. LS, Chapter 2, Self-Study problem 1. Solution is on p.61-62 with the following amendments: 4) Answer should a, and h. (Sales and marketing are often used interchangeably.) 7) Answer should be a, and NOT b. (The word-processing equipment is used for administration purposes and should not be inventorised.) 9) Answer should be a, and either g or h. (If the new product packaging is designed to attract customers’ attention and increase sales, the cost of material can also be considered a marketing cost.) 2. LS, Chapter 2, Review Question 2.7 When analysing cost behaviour the ‘level of activity’ refers to the level of work performed in the organisation. The activity generally causes the cost and, for this reason, the level of activity is often referred to as the level of cost driver. Activity can be expressed in many different ways, including units produced, number of machine hours, number of direct labour hours, number of transactions, kilometres driven, kilowatts used, pages printed, number of set-ups,
Laing, G. (2000). Chambers Continuously Contemporary Accounting. Journal of Accounting. Retrieved August 24, 2004, from www.tasa.org.au
By Thomas Ahrens (London School of Economics), and Christopher Chapman (University of Oxford), from The Contemporary Accounting Research Vol. 21 No. 2 (Summer 2004) pp. 271–301.
Now one must ascertain that such regulations would only be applied under certain governance systems- a good government; a government that is liable to the people. In such cases, there should be funds available for social programs. I will classify social programs as two types, based on how they should prioritizes allocation of funds:
After Glaser management has identified the handful of the activities that connect overhead expenses to products, they must use the appropriate measure (the cost driver) to tie the overhead expenses to the product lines or service lines. To achieve this management must specify an appropriate cost driver for tracing costs associated with the various levels of activities to the next cost objective or products. The cost drivers can include a number of things such as direct labor hours, number of batches, or number of employees. (Appendix C shows the appropriate cost driver with the various levels of activities).
S., & Hassan, M. K. (2012). The domination of financial accounting on managerial Commerce & Management, 22(4), 306-327. doi:10.1108/10569211211284502
Copyright 2006 The Society of Management Accountants of Canada All rights reserved. No part of this manual may be reproduced in any form without the permission of the copyright holder.
Occupational fraud is defined as the use of a person’s job for individual enrichment through the purposeful mishandling or misapplication of his or her employer’s capital or assets (Wells, 2005). Occupational fraud can have a serious impact with far-reaching consequences. In 2004 for the Association of Certified Fraud Examiners (ACFE) conducted a survey that provided 508 usable studies of fraud for a total of over $761 million
B The appraised value of the land is a good choice but it is based on the market. So to get more of a transaction them trading price of the stock is probably the best fit
First, we have identified if there is really an insufficiency in the amount of selling prices set by the Sales Department, in reference to Exhibit 1 of the case. We did this through identifying the maximum amount of overhead costs that the company can incur for the three products and comparing it with the total overhead costs. See Table 1 for details.
Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.
The above graph suggests that volume based computation of overhead costs does not reflect the real overhead costs based on actual production per product line (computed maximum in excess over actual). On the other hand, if we follow the allocation of overhead costs based on prime costs as illustrated in Exhibit 2 of the case, we need to consider other quantitative factors: 1. No data is available to determine the amount of raw materials used in producing each of the products. While we can assume that the production of small, colored glass ornaments uses fewer raw materials (e.g. glass) than large, colored glass ornaments, the amount of glass used to produce specialty ornaments cannot be derived from the facts of the case. 2. There is also no data available to determine the number of direct labor hours consumed for producing each product type, although evidently, specialty ornaments use more direct labor hours. Based on the above considerations, we deem it inaccurate to base overhead on prime costs, a common practice in traditional costing. In addition,
In this report, I will provide a discussion of how activity-based costing (ABC) may assist Sierra Ltd to address its current issues. With the fragmented market in the recent past, companies are using different costing and pricing strategies to remain competitive. Organisations have implemented product diversification and automation. This trend has made the allocation of costs for production overhead an important aspect in calculating product cost. The important issues facing Sierra Ltd include the use of a traditional approach for product costing that distorts some of the organisation’s product cost. In addition, the company is experiencing problems related to generations of sales prices, hence, the company adds 30% margin to production costs of all products to get actual sales prices. Another issue is about engine component sales that have been unstable in comparison to transmission and clutch components. These issues will be addressed in this report by assessing Sierra Ltd current costing and pricing practices. The report will also discuss whether ABC is suitable for the organisation, and finally, the report will present important factors the management of Sierra should take into consideration to ensure successful adoption of ABC if they decide to go ahead with Baljit’s proposition.
1. Identify the flaws associated with the current method of assigning shipping and warehousing costs to Sharp’s products.
Suzana Sulaiman Aliza Ramli Accounting Research Institute & Faculty of Accountancy Universiti Teknologi MARA, Malaysia Falconer Mitchell University of Edinburgh, UK Abstract Without knowledge of how the management accounting (MA) discipline changes, its development cannot be properly understood. Prior research indicates that MA has been changing and that many factors are
ABC refers to cost attribution to cost units on the basis of benefit received from indirect activities e.g. material ordering, material handling, machine setups, quality assuring, customer support services etc. For each such activity, it is necessary to identify a cost driver that causes incurrence of cost relating to that activity. For example, hours spent on testing for a quality assurance activity may be used as application base of cost driver for this activity.