ACCA F5教学.ppt

1、ACCA F5,Performance Management,Zhejiang Gongshang UniversitySchool of AccountingZeng AiminEmail:Short Mobile Number: 643672,Links With Other Courses,Management Accounting (F2),Performance Management (F5),Advanced Performance Management (P5),Business Analysis (P3),Useful websites, ACCAs website. The

2、students section of the website is invaluable for detailed information about the qualification, past issues of Student Accountant (including technical articles) and a free downloadable Student Planner App.,Part A Specialist cost andmanagement accounting techniques,1. Costing 2. Accounting Techniques

3、 2a. Activity Based Costing 2b. Target Costing 2c. Lifecycle Costing 2d. Throughput Accounting 2e. Environment Accounting,Chapter 1 Costing,8,Why companies need to know about product costs,Financial Accounting To create financial statements profit and loss account cost of sales, profit balance sheet

4、 valuation of stock Management Accounting To make managerial decisions about: product pricing make or buy accepting a special order closing a department,1. Costing is the process of determine the costs of products, services or activities.,Direct Cost,Material,Labour,Expense,Indirect Costs,Production

5、,Non-production,?,?,Product Cost,TOTAL COST,Indirect Costs,2. The problem of overhead How to treat the indirect costs (or Overheads) ? E.g. Factory rent and rates; supervision costs; machine depreciation; heating and lighting etc. 2.1 Use Absorption Costing method Product cost = direct costs + a por

6、tion of all production overhead expenditure Reasons: Inventory valuations Pricing decisions Establishing the profitability of different products,2.1 Use Absorption Costing method,Direct Cost,Material,Labour,Expense,Indirect Costs,Production,Non-production,Absorbed Overhead,Under/over absorbed OH,Pro

7、duct Cost,TOTAL COST,Indirect Costs,2.2 Use Marginal Costing Method Product cost = all variable production costs Absorption costing can be misleading,Direct Cost,Material,Labour,Expense,Indirect Costs,Production,Non-production,Variable Overhead,Fixed OH (FOH),Product Cost,TOTAL COST,Indirect Costs,3

8、. A revision of absorption costing 3 stages: Direct costs + Overhead traceable to cost center + a share of general overhead costs + a share of service cost centers cost Total overhead costs,1. Allocation stage,2. Apportionment stage,Using overhead absorption rates (OAR) to allocated to the productio

9、n cost: 3. Absorption stage,Cost per unit calculation,Example 1: CD Factory,Slide 18,4. Overhead absorptionOverhead absorption rates (OAR),Choose basis first,Slide 19,Choosing of absorption basis:,E.g. Produce 20,000 CDs Pressing = $13,200/20,000 CDs = $0.66 Packing = $6,800/20,000 CDs = $0.34 $1.00

10、 add to cost card,Slide 22,Problem: Over and under absorption of overheads,Because the overhead absorption rate is based on estimates (of both numerator and denominator), it is possible has a variance at the end of period. Overhead absorbed = OAR x actual activity,Actual overhead expenditure X Overh

11、ead absorbed (X) Under / (over) absorption X,E.g. the budgeted overhead = $80,000, the budgeted activity level = 40,000 direct labor hours, the actually overheads = $84,000 and 45,000 direct labor hour: 1. absorption rate = $80,000 / 40,000 =$2 2. overhead absorbed = $2 x 45,000 = $90,000 3. overhea

12、d incurred (actual) = $84,000 4. over-absorption of overhead = $90,000 - $84,000 = $6,000,Slide 24,Lecture example 2,Slide 25,Lecture example 2,Approach Set up proforma P&Ls Fill in easy numbers Do a standard cost card Deal with fixed overheads (AC) Do inventory working,Slide 26,Absorption costing P

13、&L,$ Sales X,Adjustment for under/(over) absorption X,Slide 27,Absorption costing P&L cont,$ Gross profit X,Variable (X) Fixed (X),Non-production costs:,Slide 28,Lecture example 2,$ Sales,Opening inventory,Production costs Variable Fixed (absorbed),Adjustment for under/(over) absorption,Closing inve

14、ntory,Cost of sales:,Year 1,(4,200 units $10)42,000,(4,400 units $6) 26,400,-,Slide 29,Variable Fixed,Lecture example 2,(4,200 units $1) (4,200),(2,000),$ Gross profit,Non-production costs:,Year 1,Slide 30,Lecture example 2 Working 1 - Cost card,$/unit Direct materials2 Direct labour3 Prime cost5 Ov

15、erheads: variable1 fixed? Full Product cost?,Slide 31,Lecture example 2 Working 2 - OAR,= $2 / unit,Slide 32,Lecture example 2 Working 1 - Cost card,$/unit Direct materials2 Direct labour3 Prime cost5 Overheads: variable1 fixed2 Full Product cost8,Slide 33,Lecture example 2 Working 3 - overheads,Yea

16、r 1 $,Actual expenditure,Over absorption,8,800,8,500,300,Absorbed ($2 (W2) x 4,400),Slide 34,(W3) (300),Lecture example 2 absorption costing P&L,$ Sales,Opening inventory,Production costs Variable Fixed (absorbed),Adjustment for under/(over) absorption,Closing inventory,Gross Profit,Cost of sales:,Y

17、ear 1,42,000,26,400,-,(W3) 8,800,Slide 35,Lecture example 2 Working 4 - inventory,Opening inventory,-,Year 1 units,Production,Sales,Closing inventory,4,400,(4,200),Value at FULL cost per unit,= $8/unit (w1) x 200units,= $1,600,Slide 36,Gross Profit,Lecture example 2,$ Sales,Opening inventory,Product

18、ion costs Variable Fixed (absorbed),Adjustment for under/(over) absorption,Less: Closing Inventory,8,700,Cost of sales:,Year 1,42,000,26,400,-,8,800,(300),(W4) (1,600),(33,300),Slide 37,(2,000),Lecture example 2,$ Gross profit 8,700,Variable Fixed,Non-production costs:,(4,200),2,500,Year 1,Slide 38,

19、Absorption costing,Slide 39,Absorption costing,Slide 40,5. Marginal costing,Variable production costs only are included in the cost of a unit,Slide 41,Cost card marginal costing,A cost card shows us the cost to make one unit,$/unit Direct materials 15.00 Direct labour 18.00 Prime cost 33.00 Variable

20、 Overheads 2.00 Marginal Product cost 35.00,Slide 42,Contribution towards fixed costs,$Selling priceX Less: Variable production costsX Variable non-production costsX (X) ContributionX,Contribution = selling price per unitless ALL variable costs per unit,Slide 43,Marginal costing P&L,$ Sales X,Openin

21、g Stock X,Production costs X,Variable non-production costs,Closing Stock (X),Contribution X,Cost of sales:,Year 1,(X),(X),Fixed costs (X),Profit X,Slide 44,Lecture example 3,Slide 45,(200 units $6) (1,200),(4,200),12,600,Lecture example 3 Marginal costing P&L,$ Sales 42,000,Opening Stock,Var. Produc

22、tion costs,Variable non-production costs,Closing Stock,Contribution,Cost of sales:,Year 1,(25,200),Fixed costs,Profit,(4,400 units $6) 26,400,2,100,(- units $6) -,Slide 46,Lecture example 3 Reconciliation of profits,Year 1$,Absorption costing profit,2,500,Add: Fixed overhead inopening stock,Less: Fi

23、xed overhead inClosing stock,Marginal costing profit,-,(400),2,100,(200 x $2 (W2),_,(- x $2 (W2),Sales,DMs,DLs,VOHs,FOHs,sales,-variable cost of sales,VAE,FAE,VS&DE,FS&DE,-cost of sales,-period costs （NPC）,Net profit,-variable NPC,Contribution,-Fixed costs,Gross profit,Net profit,Period costs,Absorp

24、tion costing,Marginal costing,6. Absorption Costing and Marginal Costing Compared If opening and closing inventory levels differ, profit reported under the two methods will be different. In the long run, total profit will be same whatever method is used. (a) Production = sales (so inventory is const

25、ant) AC profit = MC profit (b) Production sales (so inventory is climbing) AC profit MC profit You can remember which profit will be highest using SIAM S Stock (Inventories)I Increase A Absorption profitM More,Advantages and disadvantages of marginal costing Advantages Most appropriate for decision

26、making as it highlights contribution. (It is useful for short-term pricing decisions.) Fixed costs are treated in accordance with their nature, ie as period costs. Profit depends on sales and efficiency not on production levels. Slightly simpler variance analysis. Disadvantages There is a danger tha

27、t products will be sold on an ongoing basis at a marginal contribution which fails to cover fixed costs. Does not comply with IAS 2, thus need year end adjustments for the preparation of published accounts. Need analysis of mixed costs between fixed and variable. Seasonal variations in a year can ca

28、use unnecessary profit variances.,(1) Prepare an income statement under absorption costing and marginal costing respectively, and (2) reconcile the profit figures.,Solution,=$6 x 4400,= $8000/4000 x 4400,Direct cost = $2 +$3 +$1= $6,= ($6+$2) x (4400 4200),=8800 - 8500,No proportion of fixed product

29、ion costs,= actual fixed production cost,Slide 54,Costing - Summary,All production costs are charged to units under absorption costing Absorption of overheads is a 3 step process OAR = budgeted overheads / budgeted activity Variable production costs only are charged to units under marginal costing C

30、ontribution = selling price all variable costs.,Chapter 2,a. Activity Based Costing (ABC),Slide 56,Syllabus Guide Detailed Outcomes,Slide 57,Overview,1. Activity Based Costing,An alternative to absorption costing is ABC. Traditional absorption costing uses a single basis for absorbing all overheads

31、into cost units for a particular production department cost centre. ABC considers what causes each type of overhead category to occur. Each type of overhead is absorbed using a different basis depending on the cost driver.,Slide 59,Absorption costing,Absorption costing uses one universal OAR based o

32、n machine/labour hours Implication that overheads are volume related,Slide 60,Traditional absorption costing,OAR = machine hrs,Production set up costs Machine oil Supervisor salary Machine repairs,Slide 61,Activity Based Costing (ABC),Volume related overheads,Slide 62,Activity Based Costing (ABC),Ac

33、tivities,Cost drivers,Machine oil & Machine repairs,Production set up costs,Supervisors Salary,Slide 63,Steps in ABC,Group overheads into activities cost pools Identify significant factors driving the costs cost drivers Calculate a cost per unit of cost driver Absorb activity costs based on usage of

34、 drivers,Cost driver analysis complex business environment: costs are incurred because cost drivers occur at different levels. For costs that vary with production level in the short term, the cost driver will be volume related (labor or machine hours). Overheads that vary with some other activity sh

35、ould be traced to products using transaction-based cost drivers, such as number of orders received and number of production runs.,Identifying Activity,A part of the production process for which management wants a separate reporting of the costs of the activity involved.,Unit-Level Activity,Batch-Lev

36、el Activity,Product-Level Activity,Organization-Sustaining Activity,Cost Hierarchy,Unit-level activities Performed when a unit is produced. Depend on volume of output. e.g. maintenance done, supplies used, indirect labour required Batch-level activities Performed each time a batch (group) of goods i

37、s handled or processed. e.g. placing purchase orders, setups of equipment, shipments to customers,Product-level activities Performed as needed to support the production of each different type of product. e.g. designing a product, advertising a product Organization-sustaining activities Costs of main

38、taining overall general manufacturing capacity. Cannot be directly traced to units, batches or product lines. E.g.: heating factory, cleaning executive offices, arranging for loans,Cost Hierarchy,Slide 68,Lecture example 1,ABC$ Product cost: Direct materials51010 Direct labour1055 Prime cost151515 O

39、verheads Product cost,Traditional Absorption Costing,Slide 69,Lecture example 1 cont,ABCTotal Lab hrs per unit211 Production20,00025,0002,000 Total lab hrs40,00025,0002,00067,000 OAR = $190,000 67,000 = $2.836/hr Overhead5.672.842.84,OAR working,Slide 70,Lecture example 1 cont,ABC$ Prime cost151515

40、Overheads5.672.842.84 Product cost20.6717.8417.84 Sales price20.0020.0020.00 Profit(0.67)2.162.16,Traditional Absorption Costing,Slide 71,Lecture example 1 cont,ABC Product cost ($): Direct materials51010 Direct labour1055 Prime cost151515 Overheads Product cost,Activity Based Costing,Slide 72,Lectu

41、re example 1 cont,Step 2: Identify cost drivers,$ Machining55,000 QC & Setup 90,000 Receiving30,000 Packing 15,000 Total 190,000,Cost driver Machine hours Production runs Component receipts Customer orders,Step 1: Group overheads into activities,Slide 73,Lecture example 1 cont,Step 3: Calculate a co

42、st per unit of cost driver,Step 4: Absorb activity costs based on usage of drivers,Slide 74,Lecture example 1 cont,ABCTotal Mach hrs per unit222 Production20,00025,0002,000 Total mach hrs40,00050,0004,00094,000 OAR = $55,000 94,000 = $0.585/hr,Mach costs total,$29,255 $2,341,$23,404,OAR working mach

43、ining costs,Slide 75,Lecture example 1 cont,Total Units 20,000 25,000 2,000 OAR / unit,A B C Machining $23,404 $29,255 $2,341 QC & set-up Receiving Packing,Slide 76,Lecture example 1 cont,ABCTotal Production runs1013225 OAR = $90,000 25 = $3,600 / run QC costs $36,000$46,800$7,200,OAR working QC and

44、 set up costs,Slide 77,Lecture example 1 cont,Total Units 20,000 25,000 2,000 OAR / unit,A B C Machining $23,404 $29,255 $2,341 QC & set-up $36,000 $46,800 $7,200 Receiving Packing,Slide 78,Lecture example 1 cont,ABCTotal Component receipts1010222 OAR = $30,000 22 = $1,363.64 / receipt receiving cos

45、ts $13,636$13,636$2,728,OAR working receiving costs,Slide 79,Lecture example 1 cont,Total Units 20,000 25,000 2,000 OAR / unit,A B C Machining $23,404 $29,255 $2,341 QC & set-up $36,000 $46,800 $7,200 Receiving $13,636 $13,636 $2,728 Packing,Slide 80,Lecture example 1 cont,Equal number of orders acr

46、oss all products, so.,just divide $15,000 by 3,OAR working packing costs,Slide 81,Lecture example 1 cont,Total $78,040 $94,691 $17,269 Units 20,000 25,000 2,000 OAR / unit $3.90 $3.79 $8.63,A B C Machining $23,404 $29,255 $2,341 QC & set-up $36,000 $46,800 $7,200 Receiving $13,636 $13,636 $2,728 Pac

47、king $5,000 $5,000 $5,000,Slide 82,Lecture example 1 cont,A B C Profit/unit ($): Prime cost15 15 15 Overheads3.903.798.63 Product cost18.9018.7923.63 Sales price20.00 20.00 20.00 Profit1.101.21(3.63),Slide 83,Implications of ABC,When to use ABC,Consider:,Benefits of ABC,Criticisms of ABC,Implication

48、s of switching to ABC,Slide 84,When ABC should be used,Slide 85,Benefits of ABC,Slide 86,Criticisms of ABC,Slide 87,Implications,Slide 88,Activity Based Costing - Summary,ABC gives more meaningful product costs when overheads are high and there is a diverse product range Overheads are grouped into a

49、ctivities Cost drivers are identified Overheads are absorbed using the cost drivers,House Inc. manufactures 2 product on a common assembly line by the same direct laborers. Different direct materials are used in each type and the machinery is retooled for each product. Until now, MO costs have been

50、allocated on the basis of direct labour-hours using a plant-wide rate. The manager is considering the adoption of ABC method. Following information is provided: Required: a. Use ABC and single OAR determine the total manufacturing cost of each of the two product lines and the cost per unit. b. Which

51、 of the two products is undercosted / overcosted? How it affects cross-subsidization?,Solution- a: i) ABC,Solution- a: i i) single OAR,Solution- b,Cross-subsidization can occur with plant-wide costing where overhead, which is not closely connected with the actual activities giving rise to the overhe

52、ad amounts (i.e., the true cost drivers), is applied to products using differing quantities of those cost drivers. Such a broad application of overhead can distort the true cost of manufacturing those products. For House, the unit cost to manufacture product B is actually higher than it appears usin

53、g the plant-wide overhead rate, and the unit cost to manufacture product A is less than it appears using the plant-wide overhead rate. This may affect the pricing of the two products, the revenue generated by each product (price may affect demand) and, consequently, the companys overall profitabilit

54、y. It may also negatively affect management decisions about where to direct new resources available to the company. In this case, product B are being undercosted and are being subsidized by product A, which are being overcosted when a plant-wide overhead rate is used.,Chapter 2,b. Target Costing,Obj

55、ectives: Derive a target cost in manufacturing and service industries Explain the difficulties of using target costing in service industries Explain the implications of using target costing on pricing, cost control and performance management Suggest how a target cost gap might be closed Exam Context

56、 Target costing may form all or part of a question. You should be prepared to not only calculate a target cost but also to discuss the difficulties and implications of using target costing.,Overview,Slide 96,Target costing,Traditionally:,The focus is internal,Slide 97,Target costing,Target costing:,

57、target cost (3rd),The focus is external,Slide 98,Implementing target costing,Slide 99,Target Costing,Estimated cost,Cost Gap,Target cost,-,=,Slide 100,Lecture example 1,$/unit Target price 125.00 Target profit (25% margin) 31.25,Target cost 93.75,Slide 101,Lecture example 1,Expected cost Timber Roof

58、ing Wire Labour Variable overhead,$ / unit 48.00 35.00 1.50 14.00 3.00 101.50,Slide 102,Lecture example 1,$/unit Expected cost 101.50 Target Cost 93.75 Cost gap 7.75,3. Closing a target cost gap,How to close a target cost gap? Reducing the number of components Using standard components wherever poss

59、ible Using cheaper staff Using different materials Acquiring new, more efficient technology Training staff in more efficient techniques Cutting out non-value-added activities,4. Implications,Target costing turns the traditional cost plus approach to pricing on its head, meaning pricing is the first consideration. Cost control is cons