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Cost Accounting

Transcript: COST OBJECTIVE Refers to an activity such as to produce a product or to render a service for which cost can be ascertained. COSTING Refers to the process of determining the cost incurred for a cost objective. The process includes the recording of cost, the allocation of cost to the cost objective and the analysis of such cost. COST UNIT Refers to the quantitative unit of product or service to which costs can be related. The nature of the cost unit will depend on the type of goods being produced. A cost unit that is most relevant to the purpose of the cost ascertainment should be used. For countable items, they are usually expressed as units of produced such as a unit of car, a unit of tire etc. Where it is not practicable to count the individual item of production, cost unit often takes different forms of expression as follows. UNIT COST Refers to the amount of cost determined for each cost unit of a product or a service. The unit cost is also expressed as the cost per unit (product/service) DEFINITION/TERMINOLOGIES IN COST ACCOUNTING MEMBERS: FARAH SYAHIRA BINTI LAHMAI IZZATI SYAFIQAH BTE MOHAMMAD HISHAM NURNABIHA BINTI KAMARUZAMAN MURNI MISSARAN COST An amount that has to be paid or given up in order to get something. In business, cost is usually monetary valuation of : Effort Material Resources Time and utilities consumed Risks incurred Opportunity forgone in production in delivery of a good or service

Cost Accounting

Transcript: Stephen Matenga: s-30576 Determine how changes in cost and volume affect company’s operating income n net income Understand relationship between cost, volume & profit of an org What products to manufacture or sell What pricing policy to follow What marketing strategy to employ What type of productive facilities to acquire Conclusion Changes in rev. & costs result of changes in volume TC divided into FC and VC when graphed TR + TC has linear relation to output USP, UVC, FC known and constant Value of money constant over time Sales mix is constant, or one pdt is used limitations Short run, marginal analysis Does not consider the life ciycle of a prduct info it give Target NP ? basic planning tool Insert the target operating profit in the formula and solve for target sales either in pounds or units. (Fixed costs + Target operating profit) divided either by Contribution margin percentage or Contribution margin per unit USP = Unit selling price UVC = Unit variable costs UCM = Unit contribution margin CM% = Contribution margin percentage FC = Fixed costs Q = Quantity of output (units sold or manufactured) OP = Operating profit TOP = Target operating profit TNP = Target net profit Variables effects on taxes How many units shall we produce, how much shall we invest Use for orgs CVP Analysis TR = TC Cost Volume Profit Relevancy The higher the profit the higher the tax Max 3000 Additional Demand 4000 should we meet the demand? BE, total cost, TR Mission Application To changes in Revenues – Variable costs – Fixed costs = Target net income ÷ (1 – tax rate) output level, selling price, variable costs per unit, or fixed costs. Examines the behaviour of TR, TC & OP What £ sales are needed to achieve this profit? Introduction With the equation approach, breakeven sales in units is calculated as follows: (Unit sales price × Units sold) – (Variable unit cost × units sold) – Fixed expenses = Operating profit CVP Analysis BE Scenario assumptions decision making

Cost Accounting

Transcript: Should Company “A” Accept or Reject the proposal Proposal Placed Presented by: "ARIBA" M.Usman Khan Imran Ahmad M.Ali M.Khalid Zaffar The Party Connection prepares complete party kits for various types of celebrations. It is currently operating at 75% of its capacity. It costs The Party Connection $4.50 to make a packet that it sells for $25.00. It currently makes and sells 84,000 packets per year. Explanation Via Example Company “B” places a Special Order 15,000 packets at a price of $20 per packet to be shipped overseas. Should the Party Connection accept this special order? Company “B” Need 15000 units Will Pay $20 per unit Party Connection Presentation On: Cost Accounting(One Time Only Special Orders) .Special Order Decision .Incremental Revenue .Incremental Cost .Relevant Cost .Relevant Revenue Party Connection

Cost Accounting

Transcript: Freedom Card Case Charging for customer services? Introduction Cost Accounting Case Study Content Customer Profitability Profiles However... Some customers are profitable, some are not. Recommendation: Bay Bank could develope a product hierarchy Basic (for low-volume cardholders; fees applied; customers B, D) Premier (for high-volume cardholders; fees waived; customers A, C) Introduction Customer Profitability Analysis Questions: Should the company charges the supportive activities Anylze a proposal - Discontinue the low volume credit-card holders Ethical Issue - Casino's proposal Consumer Profitability Analysis Discontinuation Customer Profitability Profiles Long-run customer profitability. Ability to learn from customer Increase in overall demand from having well-known Customers Revenue: Commission: 1.5% * + Interest Revenue: 9.0% * + Annual Fee Charging for customer services? Cost Incurred: Processing Cost: $0.5 per transaction Inquiries Cost: $5 once Credit Card Replacement: $120 per card Account Maintenance(Bank Stmts): $108 annually Ethical Issues Charging for customer services? Wong Wing Fai, Fai 1174743 Wang Meng, Alex 1180651 Ho Sai Lun, Edmond 1128811 Law Kwok Fai, Fai 1118335 Chan Ka Chun, Eric 1182398 A $1252 $1790 69.94% $1252 102.54% C $336 $740 45.41% $1588 130.06% D ($89) $129 -69.99% $1499 122.77% B ($278) $390 -71.28% $1221 100% Freedom Card: Credit Card Organized by Bay Bank Usage: Generally, card holder can use the card to purchase at the retail merchants Assumption 1: Customers will NOT react to the fees in any aspect at all, including The amount of annual purchases Customer Satisfaction Customer loyalty to Freedom Card etc. Conclusion: Charging for customer services is justified because this will recoup the costs of providing customer services lower the demand for inquiries/card replacement NOT affect the present and future revenue It is Profitable legal Fair It is not right Negative effect Destroy the image of company Deteriorate the issue of gambling Induce younger people to gamble Thank you! Assumption 2: Customers will react to the fees. For instance, Some customers will cancel their credit cards once the cards are lost or stolen inasmuch as the card replacement fee Customers will switch to other kinds of credit cards, which provide free customer sevices Conclusion: Highly sensitive to the fees-->waived Q & A Tucker’s 5-question profitable? legal? fair? right? sustainable or environmentally sound? Freedom Card Customer Customer-level Customer OI dividend Cumulative Cumulative-customer-level Code operating income Revenue by revenue Customer level ol over total customer-level Profit comes from: Commission: 2.0% from the payments made by the holders to retail merchants, 0.5% of total went bad in 2006 Interest Revenue: 9% on the annual outstanding balance on card holders Annual Fee: $50, Students and "lifetime promotion program" holders can be exempted

Cost Accounting

Transcript: *Before becoming an accountant you must take an exam that is conferred by the IMA Minimum Requirement: Bachelors Degree. It is recommended that employees have a Masters Degree in Business Administration or a Masters in Accounting. A cost accounting system that accumulates manufacturing costs separately for each job. It is used for firms that make unique products and special orders. Job Outlook and Salary Projected Job Growth (2012-2022)* 13% for all accountants and auditors by: Diamond Brown pd. 8 Cost Accounting Sources: http://www.accountingcoach.com/blog/what-is-cost-accounting http://www.businessdictionary.com/definition/cost-accounting.html http://www.dummies.com/how-to/content/cost-accounting-for-dummies-cheat-sheet.html http://accountingexplained.com/managerial/cost-systems/ http://study.com/articles/Cost_Accountant_Job_Duties_Salary_and_Education_Requirements.html The Two Main Cost Accounting Systems They determine the costs of products, processes, projects, etc. in order to report the correct amounts on the financial statements. Education Requirements Accountants use many principles to guide their decision-making process, such as the matching principle and the principle of conservatism. Just like in any discipline, you use specific cost accounting terms and ideas to communicate meaning and understand procedures. Understanding basic concepts in crucial, so to start using cost accounting analysis, you should be familiar with the terms. All in all, to be a cost accountant you must first obtain a degree in the field. From there you must understand that being a cost accountant means you will have to deal with a lot of analytical problems. Also, you'll determine the costs of products, processes, projects, etc. in order to report the correct amounts on the financial statements and assist in the management in making decisions and in the planning and control of an organization. With a 13% annual increase for the needs of an accountant, this career has a bright future. A cost accounting that accumulates manufacturing separately for each process. This method is appropriate for products whose production is a process involving different departments and costs flow from one department to another. So what is Cost Accounting? Process Costing Other Requirements: Voluntary certifications as a Certified Management Accountant (CMA) This data is then summarized and analyzed to arrive at selling price, or to determine where savings are possible. What do Cost Accountants do? Cost Accounting Systems 2. Cost Accounting considers money as the economic factor of production. 1. Job Order Costing A cost accounting system is a framework used by firms to estimate the cost of their products for profitable analysis, inventory valuation and cost control. The median annual salary of accountants and auditors was 65,080 in May 2013. Certified Professionals earn approximately 32% more than those without a CMA designation. A method in accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded. Professions: Management Company, a niche Furniture, Producer, Air Surveillance Producer. Professions: Oil Refiners, Chemical Producers, etc. Accounting Basics: They assist in the management in making decisions and in the planning and control of an organization.

Cost Accounting

Transcript: Agenda Introduction Problem Options Solution Analysis Conclusion Cost Accounting Group Project GroupMates Mussa Bin Muzzamel Shek Jahed Mohamed Jama Mohamoud Mohab Farag Introduction & problem producing the current product as it is reducing the selling price by 10 percent increase the selling price and enhance quality produce new product with the current product Thank you for listening... Solution Analysis CEO of Al Khalil Company is not satisfy with the current situation of the company Product A becoming less profitable CEO of the company Mr. Ahmed concern with it’s product line Company is not performing at their best Planning to introduce new product B The company expect more profit by producing product B Company wants to increase 10% in market share in next 5 years. Introduce product B along with product A Options Professor Name: Hazem Ismael

Cost accounting

Transcript: About Administrational advantages Administrative workload can be decreased by automating cost accounting processes Request and approval processes become transparent and manageable Documents and certificates required for the process are archived and traceable in a common database Only those requests which are related to a specific department or function can be accepted Managerial advantages Technology advantages Implementation of best practices Cost accounting Proven enterprise level security and safety Scalable solution that grows with your business Requested expenses can be monitored in real time, hence cash flow planning becomes easier Decreases the administrational workload of cost accounting Training and support provided as required The system only needs parametrization - defining process steps, responsible personnel and deadlines Multi cycle approval processes enables multi - level approvals No programming required for process creation and management No initial investment required Automating expense approval processes No additional IT costs in operations Manages employee expense requests ad approvals No need for a long implementation period Predefined processes based on international best practices All related documents are stored and traceable Online solution - access anytime, anywhere Approval process ensures transparecy of all expense requests Enables transparent expense request processes and return on investment monitoring Only selected request types are available for functions All documents used in the the process are archived and traceable in a common database

Cost Accounting

Transcript: Non Value Added Activites Activity Possible Activity Drivers Not willing to pay Moving Materials Inspecting Components Value Added Activites Number of defective units - An incentive is created for workers to increase efficiency and reduce waste. - This behavior is beneficial to the company as it helps to reduce their costs in buying materials for the product. Warranty hours - An incentive is created where workers are given a limited time to fix the defective parts and if they exceed the time limit, action will be taken. - This behavior is beneficial as workers will focus on their work and reduce waste, thus reduce the expenses of the business. Activity Value Justification Following are the 5 activities with possible activity drivers:- For setting up equipment Root Causes and Improvements Combining processes, locating work places closer. Defect-free Materials from Suppliers or Improved Employee Training. Activity Possible Activity Drivers Setting up equipment Setup time, Number of setups Performing warranty work Warranty hours, Number of defective parts Welding subassemblies Welding hours, Subassemblies welded Moving materials Number of moves, Distance moved Inspecting components Hours of inspection, Number of defective components Long set up time required. Defect Materials or Improper Employee Training. Long time for welding completion. For inspecting components For moving materials Problem 12-18 Joseph Fox Describe the behavior that each activity driver will encourage, and evaluate the suitability of that behavior for the company's objective of becoming more competitive In charge of a project to install an activity-based cost management system Assessing Value Content Inefficient Process Design. Inability to produce a good quality product Value Added Non Value Added Value Added Non Value Added Non Value Added For each activity, assess the value content and classify each activity as value-added or non-value-added (justify the classification). Identify some possible root causes of each activity, and describe how this knowledge can be used to improve activity performance. For purposes of discussion, assume that the value-added activities are not performed with perfect efficiency. 4 Manufacturing Process (Change of state). Possible to prevent warranty if production was done properly. Manufacturing Process (Change of state). Waste of time and resources for moving of materials. Only checks state of product (Change of state) Barizah Mustapa & Chua Cze Jia And also under the conditions:- setup time - An incentive is created for workers to reduce setup time up to zero. - Beneficial to the company as it reduces their costs in terms of paying the workers' overtime payments. Number of setups - An incentive is created where each worker will have a fixed number of setups. - Beneficial to the company as it improves efficiency and in a way, motivates the employees in terms of giving trust and responsibility. 1 Value or Non Value Added Activity Setting Up Equipment Performing Warranty Work Welding Subassemblies 3 Number of defective components - An incentive is created such as giving rewards so that the workers will try to work efficiently. - This will reduce the number of defective products to be produced. Hence, this beneficial behavior will reduce the costs in terms of inspecting the products. Hours of inspection - An incentive is created where there will be a limit for the number of hours for inspection for each month. - This will reduce the business' expenses in terms of paying workers to do the inspection. Number of moves - An incentive is created where the managers can plan a schedule of moving the products to the same and near-by place. - This will reduce the transportation cost in terms of fuel and at the same time, improve the efficiency of the company, thus, this behavior is beneficial to the company Distance moved - An incentive is created where the company will limit the number of kilometers drive for each month. - This will also reduce the transportation costs in terms of fuel, hence, this is beneficial to the company. Thank you for listening Change of state Change of state not possible with previous activities Enable other activity to be preformed Activity Root Causes Improvements What is the difference between an activity driver and a cost driver? In answering the question, describe the purpose of each type of driver For welding subassemblies Joseph and project committee are focusing on 3 additional implementation issues:- Identifying activity drivers Assessing value content Identifying cost drivers (root causes) 5 Welding hours - An incentive is created where workers will try to reduce the welding hours up to zero. - This behavior is beneficial to the company as it also reduces their costs in terms of paying the workers' overtime payments. Subassemblies welded - An incentive is created where there will only be a selected amount of product to be welded. - Beneficial to the company as it saves time and reduce

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