lecture 4ca

7/23/2019 Lecture 4CA

1/15

FINANCIAL STATEMENTS :THE BASES FOR PLANNINGAND CONTROL

Lecture # 4


2/15

DETERMINING PRODUCT COSTS AND PRICING

Cost accounting is used to determineproducts costs and help ithmar!eting decisions"

#" Determining the selling price o$ aproduct"

%" Meeting competition"

&" 'idding on contracts"(" Anal)*ing pro+ta,ilit)"


3/15

P-ANNING AND CONTRO-

Planningis the process o$ esta,lishingo,.ecti/es or goals $or the +rm anddetermining the means ,) hich the +rmill attain them" E0ecti/e planning is$acilitated ,) the $olloing1

#" Clearl) de+ned o,.ecti/es o$ the manu$acturingoperation"

%" A production plan that ill assist and guide the

compan) in reaching its o,.ecti/es"


4/15

P-ANNING AND CONTRO- 2CONT"3

Controlis the process o$ monitoring thecompan)4s operations and determininghether the o,.ecti/es identi+ed in the

planning process are ,eing accomplished"E0ecti/e control is achie/ed through the$olloing1

#" Assigning responsi,ilit)"

%" Periodicall) measuring and comparing results"&" Ta!ing necessar) correcti/e action"


5/15

RESPONSI'I-IT5 ACCOUNTING

Responsibilit a!!o"ntingis theassignment o$ accounta,ilit) $or costs orproduction results to those indi/iduals ho

ha/e the most authorit) to in6uence them" A !ost !enteris a unit o$ acti/it) ithin the

$actor) to hich costs ma) ,e practicall) ande7uita,l) assigned" The manager o$ a cost

center is responsi,le $or those costs that themanager controls"


6/15

REPORTING

Cost an# pro#"!tion reports$or a costcenter re6ect all cost and production dataidenti+ed ith that center"

The per$or%an!e reportill includeonl) those costs and production data thatthe center4s manager can control"

A /ariance is the $a&orableor

"n$a&orabledi0erence ,eteen actualcosts and ,udgeted costs"


7/15

E8A-UATING ANNUA- RESU-TS TO ORIENTT9E OUTSIDERS

Current ratio Acid : test ratio

Income ,e$ore income ta; as a ED =ACTOR5 O8ER9EADS

Salaries o$ production e;ecuti/es Depreciation

Propert) ta;

Patent amorti*ation ?ages o$ securit) guards and +re

+ghters

Maintenance and repairs o$,uilding and grounds

Insurance@ propert) and lia,ilit)


9/15

8ARIA'-E =ACTOR5 O8ER9EADS

Supplies =uel Poer Small tools

Spoilage sal/age and reclamatione;penses

Recei/ing costs 9auling ithin plant Ro)alties Communication costs O/ertime premium


10/15

SEMI 8ARIA'-E =ACTOR5O8ER9EADS Super/ision

Inspection Pa)roll department ser/ices

Personnel department ser/ices =actor) oBce ser/ices

Materials and in/entor) ser/ices Cost department ser/ices

Maintenance and repairs o$ machiner) ande7uipment

Compensation insurance

9ealth and accident insurance

Pa)roll ta;es

Industrial relations and emplo)ees4 el$are e;penses 9eat light and poer


11/15

CONTRO--A'-E AND UNCONTRO--A'-E COSTS

Controllable !osts: Costs that can ,e controlled or hea/il) in6uenced ,)

the manager"

'n!ontrollable !osts: Costs that a manager cannot in6uence signi+cantl)"


12/15

MANU=ACTURING OPERATIONSAND MANU=ACTURING COSTS

(ob S)op: -o production /olume little standardi*ation one o$

a !ind product"

Bat!): Multiple products lo /olume

Asse%bl line: A $e ma.or products higher /olume"

Mass customi*ation1

9igher production /olume man) standardi*edcomponents customi*ed components o$components"

Contin"o"s *o+1 9igher production /olume highl) standardi*ed

commodit) products"


13/15

MORE COSTC-ASSI=ICATIONS

Opport"nit !osts: Is de+ned as a ,ene+t that is sacri+ced hen the choice o$

one action preludes ta!ing an alternati/e course o$ action"

O"t o$ po!,et !osts1 Costs that re7uire pa)ment o$ cash or other assets as a

result o$ their incurrence" S"n, !osts: Costs that ha/e ,een incurred in the past"

The) do not a0ect $uture costs and cannot ,e changed ,)an) current or $uture action"

Irrele/ant to all $uture decisions"


14/15

MORE COSTC-ASSI=ICATIONS

Di-erential !osts: It is the amount ,) hich the cost di0ers under to

alternati/e actions"

In!re%ental !osts: The increase in cost $rom one alternati/e to another"

Marginal !osts: Additional costs incurred hen an additional unit is

produced"

A&erage !osts: It is the total cost $or hate/er 7uantit) is

manu$actured di/ided ,) the num,er o$ unitsmanu$actured"


15/15

Standard costs1 Pre determined costs $or direct materials direct la,or

and $actor) o/erhead" The) are esta,lished ,) using in$ormation

accumulated $rom past e;perience and data secured$rom research studies"

lecture 4ca

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