基础会计学英文版lesson13-enManagerial Accounting Concepts and Principles

Lesson

13Managerial

Accounting:Concepts

and

PrinciplesTask

Team

ofFUNDAMENTAL

ACCOUNTINGSchool

of

Business,Sun

Yat-sen

UniversityOutline2What

is

managerial

accounting?

Comparison

between

managerial

accounting

andfinancial

accountingCost

classifications

in

different

waysFlow

of

manufacturing

activities

Job

order

cost

accounting

systems

and

process

costaccounting

systemsCost

allocationIntroduction3

The

previous

12

chapters

focus

on

the

financialaccounting

topicsPlease

summarize

the

basic

points

of

financial

accountinUsers/

Time

focus/

Emphasis/

Importance/

Subject

focus/

RequirementThinking

Is

the

information

provided

by

financial

accounting

enough

for

anenterprise

to

conduct

its

operation

and

management?If

not,

how

to

satisfy

this

demand

for

the

internal

used

information?Have

you

ever

heard

“managerial

accounting”?What

is

Managerial

Accounting?4

An

activity

that

provides

financial

andnonfinancial

information

to

managers

andother

internal

decision

makers

Is

quite

important

to

planning,

control,

anddecision

making

activitiesThe

Environment

ofManagerial

Accounting5Managerial

Accounting

and

FinancialAccounting6Cost

Classifications7Costs

can

be

classified

by:RelevanceBehaviourControllabilityTraceabilityFunctionCosts

Classification

by

Relevance8RelevantIf

costs

influence

a

decisionCosts

that

are

applicable

to

a

particular

decision.

Costs

that

should

have

a

bearing

on

which

alternative

amanager

selects.Costs

that

are

avoidable.Future

costs

that

differ

between

alternatives.IrrelevantIf

costs

do

not

influence

a

decisionCosts

Classification

by

Relevance9Sunk

CostsAll

costs

incurred

in

the

past

that

cannot

be

changed

bydecision

made

now

or

in

the

future.should

not

be

considered

in

decisions.IrrelevantExample:

You

bought

an

automobile

that

cost

$30,000

twoyears

ago.

The

$30,000

cost

is

sunk

because

whether

youdrive

it,

park

it,

trade

it,

or

sell

it,

you

cannot

change$30,000

cost.Costs

Classification

by

Relevance10Out-of-pocket

costsrequire

future

outlays

of

cashassociated

with

a

particular

decisionrelevant

for

future

decisionsExample:

Considering

the

decision

to

take

avacation

or

stay

at

home,

if

you

choose

a

vacation,

you

will

only

have

travel

costs

(out-of-pocket

costs).Costs

Classification

by

Relevance11Opportunity

CostsThe

potential

benefit

that

is

given

up

when

onealternative

is

selected

over

another.Example:

If

you

were

not

attending

college

oruniversity,

you

could

be

earning

$25,000

per

year.Your

opportunity

cost

of

attending

college

oruniversity

for

one

year

is

$25,000.Costs

Classification

by

Behavior12Cost

behavior

refers

tohow

a

cost

will

react

to

changes

in

the

level

ofbusiness

activity.Fixed

costsdo

not

change

when

activity

changes.Variable

costschange

in

proportion

to

changes

in

the

volume

ofactivityCosts

Classification

by

BehaviorTotal

fixed

costs

remain

unchangedwhen

activity

changes

within

a

relevant

range.Fixed

costs

per

unit

decline

as

activity

increases.Volume

of

ActivityFixed

costs

per

unitVolume

of

ActivityTotal

fixed

costs13Costs

Classification

by

Behaviour14Total

variable

costs

change

when

activity

changes.Variable

costs

per

unit

do

not

change

as

activityincreases.Volume

of

activityotal

variable

costsVolume

of

activityVariable

costs

per

unitCosts

Classification

by

BehaviorMixed

costs–

contain

a

combination

of

fixed

and

variable

costs.VariableSales

CommissionsSales15al

CompensationTotal

mixed

costFixedMonthly

salaryCosts

Classification

by

BehaviourStep-Wise

Costsremain

fixed

over

limited

ranges

of

volumes

but

increasea

lump

sum

when

volume

increases

beyond

maximumamounts.Example:

additional

production

supervisors

must

be

addewhen

another

shift

is

added.Supervisory

Salaries16Production

VolumeCosts

Classification

by

Controllabil17Controllable

vs.

not

controllabledepends

upon

the

employee’s

responsibilities.Example:

A

lower

level

manager

may

have

control

over

overtime

costs

but

not

over

the

purchase

of

high-cost

machinery.Costs

Classification

by

Traceability18

Management

often

traces

costs

to

costobjectsTo

obtain

a

better

measure

of

their

total

costCost

objects

includeProductsServicesDepartmentsDivisionsCustomer

groupsCosts

Classification

by

Traceability19Traceable

costs

are

classified

asDirect

costs

can

be

conveniently

traced

to

a

unit

of

product

orother

cost

objective.

Examples:

salaries

of

production

workers,

salary

ofmaintenance

department

employees.Indirect

costs

must

be

allocated

to

a

unit

of

product

or

other

costobjective.

Examples:

factory

rent,

factory

light

and

heat,

factoaccounting

costs.Costs

Classification

by

Function20Manufacturing

Costsare

necessary

and

integral

to

the

production

offinished

goods.Examples:

direct

labour,

direct

materials,

andmanufacturing

overhead.Non-Manufacturing

Costsare

not

integral

to

the

manufacture

of

finishedgoods.Examples:

selling

and

administrative

expenses.Costs

Classification

by

FunctionManufacturingCostsDirectMaterialDirectLabourManufacturingOverhead21Costs

Classification

by

Function22Direct

materialsMaterials

that

are

clearly

and

easily

identified

with

aparticular

product.Example:

Steel

used

to

manufacture

an

automobileDirect

labourLabour

costs

that

are

clearly

traceable

to,

or

readilyidentifiable

with,

the

finished

product.Example:

Wages

paid

to

an

automobile

assemblyworker.Costs

Classification

by

Function23Manufacturing

overheadAll

manufacturing

costs

except

direct

material

adirect

labour.Manufacturing

costs

that

cannot

be

traceddirectly

to

specific

units

produced.Examples:Indirect

labour

–

maintenanceIndirect

material

–

cleaning

suppliesFactory

utility

costsSupervisory

costsCosts

Classification

by

FunctionManufacturing

costs

are

oftencombined

as

follows:24Costs

Classification

by

Function25

Non-Manufacturing

costs

(period

costs)

areexpenses

not

charged

to

the

product.Selling

Costs

Costs

incurred

to

obtain

customer

orders

and

to

delivfinished

goods

to

customers

—advertising

and

shippinAdministrative

Costs

Non-manufacturing

costs

of

staff

support

andadministrative

functions—accounting,

data

processipersonnel,

research

and

development.Discussions26

ABC

companymanufactures

a

portable

radiodesigned

for

mounting

on

the

wall

of

thebathroom.

The

following

list

represents

some

ofthe

different

types

of

costs

incurred

in

themanufacture

of

these

radios:The

plant

manager"s

salary.The

cost

of

heating

the

plant.The

cost

of

heating

executive

offices.The

cost

of

printed

circuit

boards

used

in

the

radios.Salariesand

commissionsof

company

salespersons.Discussions27Depreciation

on

office

equipment

used

in

the

executive offices.Depreciation

on

production

equipment

used

in

plant.Wages

of

janitorial

personnel

who

clean

the

plant.The

cost

of

insurance

on

the

plant

building.The

cost

of

electricity

to

light

the

plant.The

cost

of

electricity

to

power

plant

equipment.The

cost

of

maintaining

and

repairing

equipment

in

the plant.The

cost

of

printing

promotional

materials

for

trade shows.The

cost

of

solder

used

in

assembling

the

radios.The

cost

of

telephone

service

for

the

executive

offices.Discussions28Required:–

Classify

each

of

the

items

above

as

produccost

or

period

costs.Discussions:

the

answer291Product6Period11Product2Product7Product12Product3Period8Product13Period4Product9Product14Product5Period10Product15PeriodFlow

of

Manufacturing

ActivitiesRaw

MaterialsBeginning

InventoryRaw

MaterialsPurchasesGoodsin

ProcessBeginning

InventoryFinished

GoodsBeginning

InventoryRaw

Materials

UsedDirectLabourUsedMaterials

Activity(raw

materials)Financial

ReportsRaw

MaterialsEnding

Inv.(balancesheet)Goods

in

ProcessEnding

Inv.(balancesheet)30Production

Activity(goods

in

process)Finished

GoodsEnding

Inv.(balancesheet)Cost

of

GoodsSold

(incomestatement)Marketing

Activity(finished

goods)GoodsManufacturedFactory

OverheadUsedJob

Order

Cost

Accounting

Systems31Job

Order

Cost

Accounting

SystemsThe

production

of

products

in

response

to

specialorders.quite

flexible

in

the

number

of

products

they

canproduce.

Jobs

involving

the

production

of

more

than

one

unit

ofproduct

are

called

job

lots.Job

Order

Cost

Accounting

SystemsGoods

inProcessCost

ofGoodsSoldLabourMaterialsIndirectIndirectFinishedGoodsFactoryOverheadDirectDirectAllocateCompletedDelivered32Job

Order

Cost

Accounting

SystemsDirectMaterialsCost

per

unitfor

Job

No.

1DirectLabourFactoryOverheadJob

No.

1FinishedGoodsJob

No.

2FinishedGoodsCost

per

unitfor

Job

No.

233Process

Cost

Accounting

SystemsProcess

Cost

Accounting

SystemsUsed

for

production

of

small,

identical,

low-

coitems.Mass

produced

in

automated

continuousproduction

process.Costs

cannot

be

directly

traced

to

each

unit

ofproduct.34Process

Cost

Accounting

SystemsDirectMaterialsFinishedGoodsDirectLabourFactoryOverheadProcess

1Process

2Cost

perequivalentunit

forProcess

1Cost

perequivalentunit

forProcess

2Totalcostperequivalentunit35Unit

costTo

determine

the

cost

of

goods

transferred

fromdepartment

to

department

and

to

finished

goods,we

need

to

calculate

unit

cost.Unit

cost

is

computed

by

dividing

theaccumulated

costs

by

the

number

of

equivalentunits

produced

in

the

period.Cost

perequivalentunit=Product

costs

for

the

periodEquivalent

units

for

the

periodProcess

Cost

Accounting

Systems36

Costs

are

accumulated

for

a

period

of

time

byprocess

or

department.

Equivalent

units

is

a

concept

expressing

anumber

of

partially

completed

units

as

asmaller

number

of

fully

completed

units.Example:

Three

one-third

full

pitchers

areequivalent

to

one

full

pitcher.Equivalent

units

may

be

different

for

material

anlabour

and

overhead

at

different

stages

of

aprocess.37Process

Cost

Accounting

SystemsComparing

Job

Order

and

ProcessProduction38SimilaritiesSame

objectiveto

determine

the

cost

of

productsSame

inventory

accountsraw

materials,

goods

in

process,

and

finished

goodsSame

overhead

assignment

methodpredetermined

rate

times

actual

activityComparing

Job

Order

and

ProcessProduction39Job

OrderSystemsCustom

ordersHeterogeneous

productsLow

output

volumeHigh

flexibilityLow

to

mediumstandardizationProcess

SystemsRepetitive

productionHomogeneous

offeringsHigh

output

volumeLow

product

flexibilityHigh

standardizationDifferencesCost

Allocation–

Plant-wide

Overhead

Rate–

Two-stage

Cost

Allocation–

Activity-based

CostingHighMethods

of

Overhead

Cost

AllocationLowComplexity40Cost

Allocation41Plant-wide

Overhead

RateA

single

plant-wide

overhead

rate

is

relativelyeasy

to

usebut

may

result

in

inaccurate

product

costsCost

Allocation42Two-stage

Cost

AllocationMore

accurate

method

than

plant-wide√

Stage

1:

Allocate

service

department

costs

toproduction

departments.

Service

department

costs

areassigned

to

operating

(or

production)

departments.√

Stage

2:

Allocate

production

department

costs

to

cosobjects.

Costs

accumulated

within

operating

(orproduction)

departments

are

assigned

to

cost

objectsCost

Allocation43Cost

Allocation44Activity-based

CostingAttempts

to

better

allocate

costs

to

the

desiredcost

objects

by

focusing

on

activities

consumed

bythe

cost

objects.Many

activities

within

a

department

driveoverhead

costs.Products

require

activities.Activities

consume

resources.Cost

AllocationOverheadRateActivity×ActualRate

=Estimated

overhead

costs

in

activity

cost

poolEstimated

number

of

activity

units√

Allocate

overhead

cost:45Activity-based

Costing:

Procedures√

Identify

activities

thatconsume

resources.√

Assign

costs

to

a

cost

pool

for

each

activity.√

Identify

cost

drivers

associated

with

each

activity.√

Compute

overhead

rate

for

each

cost

pool.Cost

Allocation46

Activity-based

Costing:

Identifying

CostDriversMost

cost

drivers

are

related

to

either

volumeor

complexity

of

production.Examples:

purchasing,

invoicing,

qualityinspection,

product

design.Three

factors

in

choosing

a

cost

driver:Causal

relationshipBenefits

receivedReasonableness.Cost

AllocationCostCost

DriverMaterials

purchasingNumber

of

purchase

ordersMaterials

handlingNumber

of

materials

requisitionsPersonnelNumber

of

employeesEquipment

amortizationNumber

of

products

produced

orhours

of

useQuality

inspectionNumber

of

units

inspectedIndirect

labour

in

setting

upequipmentNumber

of

setups

requiredActivity-based

Costing:

Cost

and

Cost

Driver47Cost

Allocation48Activity-based

Costing:

BenefitsMore

detailed

measures

of

costsBetter

understanding

of

activitiesMore

accurate

product

costs

for

.

.

.Pricing

decisionsProduct

elimination

decisionsManaging

activities

that

cause

costsBenefits

should

always

be

compared

with

costs

ofimplementationSummary49Managerial

accounting

is

quite

important

to

planning,

cont and

decision

making

activities.

Managerial

accounting

and

financial

accounting

aredifferent

in

users,

time

focus,

requirements,

etc.

Costs

can

be

classified

by

relevance,

behaviour,controllability,

traceability,

and

function.Flow

of

manufacturing

activities.

Similarities

and

differences

between

job

order

andprocess

cost

accounting

systems

The

methods

of

cost

allocation:

plant-wide

overhead

ratetwo

stage

cost

allocation,

activity-based

costingCase

Study

ABC

Company

acquired

its

factory

building

about

25

years

agFor

a

number

of

years,

the

company

has

rented

out

a

small,unused

part

of

the

building.

The

renter"s

lease

will