Академический Документы
Профессиональный Документы
Культура Документы
Professor S. Roychowdhury Sloan School of Management Massachusetts Institute of Technology April 28, 2004
Outline
Cost accounting terminology Cost behavior Product costing: traditional method Product costing: activity based costing (ABC)
Managerial Accounting
Page 1
You get what you pay for Strongly recommended reading: On the folly of rewarding A, while hoping for B
Doctors and litigation penalty for type II errors.
Insurance company reward for attendance but hoping for performance. Financial markets focus on quarterly earnings while hoping for long-term growth in
profitability
Cost Driver e.g. Processing Sales Order $ Cost Object e.g., Product
10
Object X
Object Y
11
Page 2
Product X
13
Product costs can be Direct or Indirect (Overhead) Not all Direct costs are variable
The depreciation of a special piece of equipment bought to manufacture a single product line.
Page 3
Results in unitizing fixed costs: convert total fixed costs (TFC) to a unit cost by allocating TFC to the units produced.
15
Fixed manufacturing overhead is $50,000/month. Unit costs are $8 (variable) + $50,000/10,000 (fixed) or $13/unit. How do these costs flow through Inventory Accounts?
17
Page 4
18
RM Inv
WIP Inv
FG Inv
RE
Buy Materials Requisition Of materials Apply labor Apply fixed OH (Depreciation) Apply variable OH Transfer to FG Inv Sell 2000 units
20
Page 5
Buy Materials Requisition Of materials Apply labor Apply fixed OH (Depreciation) Apply variable OH Transfer to FG Inv Sell 2000 units
30
21
Buy Materials Requisition Of materials Apply labor Apply fixed OH (Depreciation) Apply variable OH Transfer to FG Inv Sell 2000 units
30 5 5
22
Buy Materials Requisition Of materials Apply labor Apply fixed OH (Depreciation) Apply variable OH Transfer to FG Inv Sell 2000 units
30 5 50 50 5
23
Page 6
Buy Materials Requisition Of materials Apply labor Apply fixed OH (Depreciation) Apply variable OH Transfer to FG Inv Sell 2000 units
30 5 50 50 5
24
Buy Materials Requisition Of materials Apply labor Apply fixed OH (Depreciation) Apply variable OH Transfer to FG Inv Sell 2000 units
30 5 50 50 5
5 65 65
25
Buy Materials Requisition Of materials Apply labor Apply fixed OH (Depreciation) Apply variable OH Transfer to FG Inv Sell 2000 units
30 5 50 50 5
5 65 65 26 26
26
Page 7
50
50
27
Direct Costs
Traced directly
Overhead Costs
Indirect Labor Indirect Materials Depreciation Traced using allocation base eg direct labor hrs, machine hrs
Product Costs
28
Purchase order processing Receiving/Inventorying materials Inspecting materials Processing accounts payable Facility maintenance Scheduling production Customer complaints Quality inspection/testing
29
Page 8
Overhead Costs
Indirect Labor Indirect Materials Depreciation
Product Costs
30
Clocks 10 18 45,000
Watches 15 36 75,000
Page 9
33
Using ABC
Allocation of : Production Setup Costs: $120,000 / (10+15) setups = $4,800/setup Material Handlg Costs: $30,000 / (18+36) part numbers = $555.56/part Packing/shipping Costs: $60,000 / (45,000+75,000) units = $0.50/unit shipped Product Costs using ABC: Production Setup Material Handling Packing/Shipping Total Per Unit Activity Level Clocks Activity Level Watches
34
Using ABC
Allocation of : Production Setup Costs: $120,000 / (10+15) setups = $4,800/setup Material Handlg Costs: $30,000 / (18+36) part numbers = $555.56/part Packing/shipping Costs: $60,000 / (45,000+75,000) units = $0.50/unit shipped Product Costs using ABC: Production Setup Material Handling Packing/Shipping Total Per Unit Activity Level 10 Clocks $48,000 Activity Level 15 Watches $72,000
35
Page 10
Using ABC
Allocation of : Production Setup Costs: $120,000 / (10+15) setups = $4,800/setup Material Handlg Costs: $30,000 / (18+36) part numbers = $555.56/part Packing/shipping Costs: $60,000 / (45,000+75,000) units = $0.50/unit shipped Product Costs using ABC: Production Setup Material Handling Packing/Shipping Total Per Unit Activity Level 10 18 Clocks $48,000 10,000 Activity Level 15 36 Watches $72,000 20,000
36
Using ABC
Allocation of : Production Setup Costs: $120,000 / (10+15) setups = $4,800/setup Material Handlg Costs: $30,000 / (18+36) part numbers = $555.56/part Packing/shipping Costs: $60,000 / (45,000+75,000) units = $0.50/unit shipped Product Costs using ABC: Production Setup Material Handling Packing/Shipping Total Per Unit Activity Level 10 18 45000 Clocks $48,000 10,000 22,500 Activity Level 15 36 75000 Watches $72,000 20,000 37,500
37
Using ABC
Allocation of : Production Setup Costs: $120,000 / (10+15) setups = $4,800/setup Material Handlg Costs: $30,000 / (18+36) part numbers = $555.56/part Packing/shipping Costs: $60,000 / (45,000+75,000) units = $0.50/unit shipped Product Costs using ABC: Production Setup Material Handling Packing/Shipping Total Per Unit Activity Level 10 18 45000 Clocks $48,000 10,000 22,500 $80,500 Activity Level 15 36 75000 Watches $72,000 20,000 37,500 $129,500
38
Page 11
Using ABC
Allocation of : Production Setup Costs: $120,000 / (10+15) setups = $4,800/setup Material Handlg Costs: $30,000 / (18+36) part numbers = $555.56/part Packing/shipping Costs: $60,000 / (45,000+75,000) units = $0.50/unit shipped Product Costs using ABC: Production Setup Material Handling Packing/Shipping Total Per Unit Activity Level 10 18 45000 Clocks $48,000 10,000 22,500 $80,500 $1.79 Activity Level 15 36 75000 Watches $72,000 20,000 37,500 $129,500 $1.73
39
Summary
Managerial accounting focuses on decision making and control:
Decision making: initiating and implementing decisions. Control: ratifying and monitoring decisions. Important: Organizational structure of firm should separate both functions.
Page 12