会计专业英语（下）fundamental accounting principles

Chapter 21,Cost Allocation and Performance Measurement,Conceptual Learning Objectives,C1: Explain departmentalization and the role of departmental accounting C2: Distinguish between direct and indirect expenses C3: Identify bases for allocating indirect expenses to departments C4: Explain controllable costs and responsibility accounting C5: Appendix 21A: Describe allocation of joint costs across products,A1: Analyze investment centers using return on total assets,Analytical Learning Objectives,P1: Assign overhead costs using two-stage cost allocation P2: Assign overhead costs using activity-based costing P3: Prepare departmental income statements P4: Prepare departmental contribution reports,Procedural Learning Objectives,One of the most difficult tasks in computing accurate unit costs lies in determining the proper amount of overhead cost to assign to each job.,Overhead Cost Allocation Methods,P1,A two-stage process may be used because different departments may have different allocation bases.,Two-Stage Cost Allocation,P1,Indirect Materials,Other Overhead,Indirect Labor,Department 1,Department 2,Department 3,Stage One: Costs assigned to departments,Two-Stage Cost Allocation,P1,Stage One: Costs assigned to departments,Two-Stage Cost Allocation,Indirect Materials,Other Overhead,Indirect Labor,Department 1,Department 2,Department 3,P1,Stage One: Costs assigned to departments,Two-Stage Cost Allocation,Indirect Materials,Other Overhead,Indirect Labor,Department 1,Department 2,Department 3,P1,Stage Two: Costs applied to jobs,Stage One: Costs assigned to departments,Jobs,Two-Stage Cost Allocation,Indirect Materials,Other Overhead,Indirect Labor,Department 1,Department 2,Department 3,P1,Jobs,Direct Labor Hours,Machine Hours,Raw Materials Cost,Departmental Allocation Bases,Stage Two: Costs applied to jobs,Stage One: Costs assigned to departments,Two-Stage Cost Allocation,Indirect Materials,Other Overhead,Indirect Labor,Department 1,Department 2,Department 3,P1,Level of Complexity,Overhead Allocation,Plantwide Overhead Rate,Departmental Overhead Rates,Activity Based Costing,Activity-Based Cost Allocation,P2,In the ABC method, we recognize that many activities within a department drive overhead costs.,P2,Activity-Based Cost Allocation,Identify activities and assign indirect costs to those activities. Central idea . . . Products require activities. Activities consume resources.,Activity-Based Costing,P2,More detailed measures of costs. Better understanding of activities. More accurate product costs for . . . Pricing decisions. Product elimination decisions. Managing activities that cause costs. Benefits should always be compared to costs of implementation.,Activity-Based Costing Benefits,P2,Most cost drivers are related to either volume or complexity of production. Examples: machine time, machine setups, purchase orders, production orders. Three factors are considered in choosing a cost driver: Causal relationship. Benefits received. Reasonableness.,Identifying Cost Drivers,P2,Identify activities that consume resources. Assign costs to a cost pool for each activity.Identify cost drivers associated with each activity.Compute overhead rate for each cost pool: Assign costs to products:,Activity-Based Costing Procedures,P2,Lets look at an example comparing traditional costing with ABC. We will start with traditional costing.,Activity-Based Costing,P2,Pear Company manufactures a product in regular and deluxe models. Overhead is assigned on the basis of direct labor hours. Budgeted overhead for the current year is $2,000,000. Other information:,First, determine the unit cost of each model using traditional costing methods.,Traditional Costing vs. ABC Example,P2,P2,Traditional Costing,Traditional Costing,P2,Pear Company plans to adopt activity-based costing. Using the following activity center data, determine the unit cost of the two products using activity-based costing.,Activity-Based Costing,P2,400 deluxe + 800 regular = 1,200 total,Activity-Based Costing,P2,Activity-Based Costing,P2,Activity-Based Costing,P2,Lets complete the table.,Activity-Based Costing,P2,Activity-Based Costing,P2,Total overhead = $720,000 + $1,280,000 = $2,000,000 Recall that $2,000,000 was the original amount of overhead assigned to the products using traditional overhead costing.,Activity-Based Costing,P2,Activity-Based Costing,P2,This result is not uncommon when activity-based costing is used. Many companies have found that low-volume, specialized products have greater overhead costs than previously realized.,Traditional Costing vs. ABC,P2,Costs and Cost Drivers in Activity-Based Costing,Exh. 21-6,P2,Primary goals,Departmental Accounting,C1,Large complex businesses are divided into departments enabling managers to have a smaller effective span of control.,Departmental Accounting,C1,Departments are established for specialized functions.,Departmental Accounting,C1,Managers use this information to: Control operations Appraise performance Allocate resources. Plan strategy,The accounting system provides information about resources used and outputs achieved.,Information for Departmental Evaluation,C1,The type of accounting information provided depends on whether the department is a . . .,Information for Departmental Evaluation,C1,Information must support these four pillars of any successful business,Information for Departmental Evaluation,C1,Direct expenses are incurred for the sole benefit of a specific department. Indirect expenses benefit more than one department and are allocated among departments benefited.,Departmental Expense Allocation,C2,Classic Jewelry pays its janitorial service $300 per month to clean its store. Management allocates this cost to its three departments according to the floor space each occupies.,Illustration of Indirect Expense Allocation,Exh. 21-7,C2,Classic Jewelry pays its janitorial service $300 per month to clean its store. Management allocates this cost to its three departments according to the floor space each occupies.,Exh. 21-7,Illustration of Indirect Expense Allocation,C2,Classic Jewelry pays its janitorial service $300 per month to clean its store. Management allocates this cost to its three departments according to the floor space each occupies.,Exh. 21-7,Illustration of Indirect Expense Allocation,C2,Service department costs are shared, indirect expenses that support the activities of two or more production departments.,Bases for Allocating Service Department Costs,Exh. 21-8,C3,ABCO allocates its $300,000 personnel cost to operating departments based on the number of employees in each department. The assembly department has 100 employees and the packing department has 150 employees. What amount of cost is allocated to assembly?a. $100,000b. $120,000c. $150,000d. $180,000,Service Department Costs Question,C3,ABCO allocates its $300,000 personnel cost to operating departments based on the number of employees in each department. The assembly department has 100 employees and the packing department has 150 employees. What amount of cost is allocated to assembly?a. $100,000b. $120,000c. $150,000d. $180,000,Assembly percentage = 100 (100 + 150) = 40% 40% of $300,000 = $120,000,Service Department Costs Question,C3,Lets prepare departmental income statements using the following steps:Direct expense accumulation.Indirect expense allocation.Service department expense allocation.,Preparing Departmental Income Statements,P3,Service Dept. One,Service Dept. Two,Operating Dept. One,Direct expenses are traced to each department without allocation.,Operating Dept. Two,Step 1: Direct Expense Accumulation,P3,Service Dept. One,Service Dept. Two,Operating Dept. One,Indirect expenses are allocated to all departments using appropriate allocation bases.,Allocation,Allocation,Allocation,Allocation,Step 2: Indirect Expense Allocation,Operating Dept. Two,P3,Operating Dept. One,Operating Dept. Two,Service department total expenses (original direct expenses + allocated indirect expenses) are allocated to operating departments.,Allocation,Allocation,Service Dept. One,Service Dept. Two,Step 3: Service Department Expense Allocation,P3,Lets examine this three-step allocation procedure for Owl Company.,Departmental Expense Allocation Spreadsheet,P3,Departmental Expense Allocation Spreadsheet,Step 1: Direct expenses are traced to service departments and sales departments without allocation.,P3,Departmental Expense Allocation Spreadsheet,Step 2: Indirect expenses are allocated to both the service and the sales departments based on floor space occupied.,Of a total of 2,000 square feet, the service departments occupy 200 square feet each, sales department one occupies 600 square feet, and sales department two occupies 1,000 square feet.,P3,Sales department one has $40,000 in sales and sales department two has $48,000 in sales.,Step 3: Service department total expenses (original direct expenses + allocated indirect expenses) are allocated to sales departments.,Departmental Expense Allocation Spreadsheet,P3,Departmental Expense Allocation Spreadsheet,Sales department one has 28 employees and sales department two has 40 employees.,Step 3: Service department total expenses (original direct expenses + allocated indirect expenses) are allocated to sales departments.,P3,Departmental Expense Allocation Spreadsheet,P3,Now that we have the costs, lets do an income statement.,Departmental Income Statements,P3,Departmental Income Statements,P3,Departmental Income Statements,P3,Departmental contribution . . . Is used to evaluate departmental performance. Is not a function of arbitrary allocations of indirect expenses.A department may be eliminated when its departmental contribution is negative.,Departmental revenue Direct expenses = Departmental contribution,Departmental Contribution to Overhead,P3,As a general rule, a department can be considered a candidate for elimination if its revenues are less than its escapable expenses.Direct expenses are usually escapable. Indirect expenses are usually inescapable.,Eliminating an Unprofitable Department,P3,Lets recast Owl Companys income statement using the departmental contribution approach where indirect expenses are not allocated.,Departmental Contribution to Overhead,P4,Net income for the company is still $17,500.,Departmental Contribution to Overhead,P4,Departmental contributions to indirect expenses (overhead) are emphasized.,Departmental Contribution to Overhead,P4,Departmental contributions are positive so neither department is a candidate for elimination.,Departmental Contribution to Overhead,P4,Costs are controllable if the manager has the power to determine, or strongly influence, the amounts incurred.A managers performance evaluation should be based on controllable costs.,Im in control,Controllable Costs,C4,Direct costs are traced to departments, but may not be controllable by the department manager. Example: Department managers usually have no control over their own salaries.Controllable costs are identified with a particular manager and a definite time period. All costs are controllable at some level of management if the time period is long enough.,Distinguishing Controllable and Direct Costs,C4,An accounting system that provides information . . .,Responsibility Accounting,C4,Responsibility Accounting,Successful implementation of responsibility accounting may use organization charts with clear lines of authority and clearly defined levels of responsibility.,C4,Amount of detail varies according to level in organization.,A department manager receives detailed reports.,A store manager receives summarized information from each department.,Responsibility Accounting Performance Reports,C4,The vice president of operations receives summarized information from each store.,Management by exception: Upper-level management does not receive operating detail unless problems arise.,Amount of detail varies according to level in organization.,Responsibility Accounting Performance Reports,C4,To be of maximum benefit, responsibility reports should . . . Be timely. Be issued regularly. Be understandable. Compare budgeted and actual amounts.,Responsibility Accounting Performance Reports,C4,A single cost incurred in producing or purchasing two or more different products. Similar to an indirect expense since it is shared among more than one cost object. Example: The cost of crude oil is a joint cost for many petrochemical products.,Joint Costs,C5,If we allocate the joint costs of raising the animal to the two products based on weight, which product would receive the largest cost allocation?,Joint Costs and Their Allocation,Hamburger, because there is more of it.,C5,If we allocate the joint costs of raising the animal to the two products based on sales value, would the steak receive a greater portion of the cost allocation?,Yes, steak has a higher sales value than hamburger.,Joint Costs and Their Allocation,C5,Allocate the $200,000 joint cost based on sales value.,Product One Sales value = $80,000,Product Two Sales value = $200,000,Product Three Sales value = $120,000,Value Basis Allocation of Joint Costs,C5,Value Basis Allocation of Joint Costs,C5,Chapter 22,Cost-Volume-Profit Analysis,Conceptual Learning Objectives,C1: Describe different types of cost behavior in relation to production and sales volume C2: Identify assumptions in cost-volume profit analysis and explain their impact C3: Describe several applications of cost-volume-profit analysis,A1: Compare the scatter diagram, high-low, and regression methods of estimating costs A2: Compute contribution margin and describe what it reveals about a companys cost structure A3: Analyze changes in sales using the degree of operating leverage,Analytical Learning Objectives,P1: Determine cost estimates using three different methods P2: Compute the break-even point for a single product company P3: Graph costs and sales for a single product company P4: Compute break-even point for a multiproduct company,Procedural Learning Objectives,CVP analysis is used to answer questions such as: What sales volume is needed to earn a target income? What is the change in income if selling prices decline and sales volume increases? How much does income increase if we install a new machine to reduce labor costs? What is the income effect if we change the sales mix of our products or services?,Questions Addressed by Cost-Volume-Profit Analysis,C2,Number of Local Calls,Monthly Basic Telephone Bill,Total fixed costs remain unchanged when activity changes.,Your monthly basic telephone bill probably does not change when you make more local calls.,Total Fixed Cost,C1,Number of Local Calls,Monthly Basic Telephone Bill per Local Call,Fixed costs per unit decline as activity increases.,Your average cost per local call decreases as more local calls are made.,Fixed Cost Per Unit,C1,Minutes Talked,Total Long Distance Telephone Bill,Total variable costs change when activity changes.,Your total long distance telephone bill is based on how many minutes you talk.,Total Variable Cost,C1,Minutes Talked,Per Minute Telephone Charge,Variable costs per unit do not change as activity increases.,The cost per long distance minute talked is constant. For example, 7 cents per minute.,Variable Cost Per Unit,C1,Cost Behavior Summary,C1,Mixed costs contain a fixed portion that is incurred even when the facility is unused, and a variable portion that increases with usage.Example: monthly electric utility charge Fixed service fee Variable charge per kilowatt hour used,Mixed Costs,C1,Variable Utility Charge,Activity (Kilowatt Hours),Total Utility Cost,Total mixed cost,Fixed Monthly Utility Charge,Mixed Costs,C1,Activity,Cost,Total cost remains constant within a narrow range of activity.,Step-Wise Costs,C1,Activity,Cost,Total cost increases to a new higher cost for the next higher range of activity.,Step-Wise Costs,C1,Costs that increase when activity increases, but in a nonlinear manner.,Activity,Total Cost,Curvilinear Costs,C1,The objective is to classify all costs as either fixed or variable.,Identifying and Measuring Cost Behavior,P1,A scatter diagram of past cost behavior may be helpful in analyzing mixed costs.,Scatter Diagram,P1,Plot the data points on a graph (total cost vs. activity).,P1,Scatter Diagram,Draw a line through the plotted data points so that about equal numbers of points fall above and below the line.,Estimated fixed cost = 10,000,P1,Scatter Diagram,Vertical distance is the change in cost.,Horizontal distance is the change in activity.,P1,Scatter Diagram,The following relationships between units produced and costs are observed:Using these two levels of activity, compute:the variable cost per unit. the total fixed cost.,The High-Low Method,P1,Exh. 22-6,P1,The High-Low Method,Exh. 22-6,P1,The High-Low Method,Exh. 22-6,P1,The High-Low Method,The objective of the cost analysis remains the same: determination of total fixed cost and the variable unit cost.,Least-squares regression is usually covered in advanced cost accounting courses. It is commonly used with spreadsheet programs or calculators.,Least-Squares Regression,P1,Lets extend our knowledge of cost behavior to break-even analysis.,Break-Even Analysis,P2,The break-even point (expressed in units of product or dollars of sales) is the unique sales level at which a company earns neither a profit nor incurs a loss.,Computing Break-Even Point,P2,Contribution margin is amount by which revenue exceeds the variable costs of producing the revenue.,Computing Break-Even Point,P2,How much contribution margin must this company have to cover its fixed costs (break even)?,Answer: $24,000,P2,Computing Break-Even Point,How many units must this company sell to cover its fixed costs (break even)?,Answer: $24,000 $30 per unit = 800 units,P2,Computing Break-Even Point,We have just seen one of the basic CVP relationships the break-even computation.,Computing Break-Even Point,Unit sales price less unit variable cost ($30 in previous examp