MACS-Session+1

8/16/2019 MACS-Session+1

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Manager aAccounting &Control SystemsMORE ACCOUNTING!!!


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Course Overview

Moule I Cost Accounting unamentals

Moule II Cost Allocation

Moule III Tools "or #lanning & Control

Moule I$ %ecision Maing

Moule $ #er"ormance Evaluation


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Managerial Accounting an inanciAccounting

Managerial accountingprovides informationfor managers inside an

organization whodirect and control

its operations.

Financial accountiprovides informatioto stockholders,

creditors and othewho are outside

the organization


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#lanning

Identifyalternatives.

Identifyalternatives.

Select alternative that doesthe best job of furtheringorganization’s objectives.

Select alternative that doesthe best job of furthering

organization’s objectives.

Develop budgets to guprogress toward theselected alternative

Develop budgets to guprogress toward theselected alternative


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Directing and Motivating

%irecting an motivating involves managay(to(ay activities to ee) t*e organi+arunning smoot*ly,

-Em)loyee wor assignments,

-Routine )ro.lem solving,

-Con/ict resolution,-E0ective communications,


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Controlling

The control function ensuresthat plans are being followed.

The control function ensures

that plans are being followed.

Feedback in the form of performance reports

that compare actual results with the budget

are an essential part of the control function.

Feedback in the form of performance reports

that compare actual results with the budget

are an essential part of the control function.


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#lanning an Control Cycle

Decisionaking

Formulating long-

and short-term plans(Planning

Formulating long-

and short-term plans(Planning

Measuring

performance

(Controlling

Measuring

performance

(Controlling

!mplementin

plans (Directi

and Motivatin

!mplementing

plans (Directin

and Motivating

Comparing actual

to planned

performance(Controlling

Comparing actual

to planned

performance

(Controlling

!egin


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1earning O.2ective

Identify the major differences and similaritiesbetween financial and managerial accountin


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%i0erences 3etween inancial aManagerial Accounting

Financial "ccounting Managerial "ccoun

#. $sers %&ternal persons who Managers who plan

make financial decisions and control an organi'

(. Time focus )istorical perspective Future emphasis

*. +erifiabilit, %mphasis on %mphasis on relevan

versus relevance verifiabilit, for planning and con

-. Precision versus %mphasis on %mphasis on

timeliness precision timeliness

. /ub0ect Primar, focus is on Focuses on segmen

the whole organi'ation of an organi'ation

1. 2e3uirements Must follow 4""P 5eed not follow 4"

and prescribed formats or an, prescribed for


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Similarities .etween Managerial aninancial Accounting

Both deal with economic events of a busine

Both require that economic events be quaand communicated to interested parties.


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Cost Terms4

Conce)ts anClassi5cations


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Cost O.2ects

Anyt*ing w*ose cost we want to ete

#rouct4 )rocess4 location4 )erson4 re

customer4 e)artment4 etc, Is riven .y t*e manager6s in"ormatinees


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1earning O.2ective

Unerstan t*e i0erences .etween an inirect costs,


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Assigning Costs to Cost O.2e

Direct costs Costs that can beeasily andconveniently traced toa unit of product orother cost object.

Examples: directmaterial and directlabor

ndirect costs Costs that cannot beeasily and convenientraced to a unit ofproduct or other costobject.

Cost is s*are 7or alloca

among cost o.2ects

No a))arent 9lin: .etwt*e cost an t*e o.2ect

Not cost e0ective to tra

Example: manufacturoverhead


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%irect & Inirect Costs

'*et*er a cost is irect or inirect e)ent*e cost o.2ect

As cost o.2ects .ecomes more etaile4 "ecosts are irectly relate


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E;ercise

%irect

Cost Cost O.2ect Cost=, T*e salary o" t*e *ea

c*e" T*e *otel6s restaurant

>, T*e salary o" t*e *eac*e"

A )articular restaurantcustomer

?, Room cleaning su))lies A )articular *otel guest@, lowers "or t*e rece)tion

es

A )articular *otel guest

, T*e wages o" t*e oorman A )articular *otel guestB, Room cleaning su))lies T*e *ousecleaning

e)artment

, ire insurance on t*e *otel.uiling

T*e *otel6s gym

D, Towels use in t*e gym T*e *otel6s gym

Classi"y t*e "ollowing costs as irect or inirect in relation to t*e co


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Cost Centre Cost )ool

System "or accumulation o" inirect coow many cost Centres is Ho)timal6

Single cost centre vs Multi)le costcentresF

Cost(.ene5t analysisF

Is an Hintermeiate6 cost o.2ect


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1earning O.2ective

%istinguis* .etween )rouct costs an costs an give e;am)les o" eac*,


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"he #roduct

Directaterials

Directaterials

Direct"abor

Direct"abor

anufactur#verhead

anufacturi#verhead

Manu"acturing Costs


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%irect Materials

Raw materials t*at .ecome an integral )art ot*e )rouct an t*at can .e convenientlytrace irectly to it,

%&ample6 " radio installed in an automobile%&ample6 " radio installed in an automobile


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%irect 1a.or

T*ose la.or costs t*at can .e easily trace toiniviual units o" )rouct,

%&ample6 7ages paid to automobile assembl, wor%&ample6 7ages paid to automobile assembl, wor


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Manu"acturing costs t*at cannot .e traceirectly to s)eci5c units )rouce,

Manu"acturing Over*ea

%&amples6 !ndirect labor and indirect materials%&amples6 !ndirect labor and indirect materials

7ages paid to emplo,ees

who are not directl,involved in production

work.%&amples6 maintenance

workers8 0anitors andsecurit, guards.

Materials used to supp

the production proces

%&amples6 lubricants acleaning supplies used inautomobile assembl, pl


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Non(manu"acturing Costs

/elling

Costs

Costs necessar, to get

the order and deliver

the product.

"dministrati

Costs

"ll e&ecutiv

organi'ational

clerical cost


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Juic C*ec

'*ic* o" t*e "ollowing costs woul .econsiere a )erio rat*er t*an a )rouctcost in a manu"acturing com)anyA, Manu"acturing eKui)ment e)reciation

3, #ro)erty ta;es on cor)orate

*eaKuarters,C, %irect materials costs,

%, Electrical costs to lig*t t*e )rouction

"acility,

E, Sales commissions,


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#rouct vs, #erio Costs

# r o

u c t c o s t s %irect material

%irect la.or

Over*ea

#rime costs

Conversion cost

E;am)le


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E;am)le

#rouct7Inventoria.l

e8 Cost=, T*e cost o" t*e memory c*i)s use in a raar set>, actory *eating costs?, actory eKui)ment maintenance costs@, Training costs "or new aministrative em)loyees, T*e cost o" t*e soler t*at is use in assem.ling

t*e raar setsB,T*e travel costs o" t*e com)any6s sales)ersons, 'ages an salaries o" "actory security )ersonnelD, T*e cost o" air(conitioning e;ecutive oLces, 'ages an salaries in t*e e)artment t*at *anles

.illing customers=, %e)reciation on t*e eKui)ment in t*e 5tness room

use .y "actory worers ==, Tele)*one e;)enses incurre .y "actory

management=>, T*e costs o" s*i))ing com)lete raar sets to

customers=?, T*e wages o" t*e worers w*o assem.le t*e raar

Classi"y t*e "ollowing as )rouct or )erio costs,


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Manu"acturing Cost lows

Raw MaterialsInventory

'or in #rocessInventory

inis*e GoosInventory

Cost oGoos S

actory 1a.or

Over*ea

7>8

7?87=8

$%& aterials are placed into production

$'aw materials used in production&$(his plus direct labor and overheae)uals total manufacturing cosinputs&

$*& +oods are completed $ost of goodmanufactured, i.e. outputs&

$-& +oods are sold


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1earning O.2ective

Unerstan t*e i0erences .etween vacosts an 5;e costs,

Cost Classi5cations "or #reicting Cost 3


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Cost Classi5cations "or #reicting Cost 3

ow a cost will reto c*anges in t*e leo" activity wit*in t

relevant range,

- Total variable costs

c*ange w*en activityc*anges,

- Total xed costs remunc*ange w*en actc*anges,

ow a cost will reato c*anges in t*e leo" activity wit*in t*

relevant range,

- Total variable costs c*ange w*en activityc*anges,

- Total xed costs remunc*ange w*en actic*anges,


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$aria.le CostCost )er unit remains constant

Total cost varies irectly wit* activity

+ariable Cost

9

(9

-9

19:9

#99

#(9

# ( * - . 1 ; : < #9

$nits of "ctivit,

C o s t Total Cos

Cost per


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i;e Cost Total cost remains constant

Cost )er unit varies inversely wit* activity

Fi&ed Cost

9

9

9

19:9

#99

#9

# * 1 ; : < #9

$nits of activit,

C o s t (otal os

ost per


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Ste) i;e Cost

i;e t*roug* some range4 .ut increases w*en some increment is

/tep Fi&ed Cost

9

9

-9

19:9

#99

#9

#-9

# * - 1 ; : < #9

$nits of activit,

C o s t

(otal cost

ost per un


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Mi;e CostContains a 5;e an a varia.le com)onent

Cost )er unit is not constant

Mi&ed Cost

/

*/

0/

1/2/

%//

%*/

%0/

% * - 0 3 1 4 2 5 %/

$nits of activit,

C o s

t

(otal cos,ost per


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Juic C*ec

'*ic* o" t*e "ollowing costs woul .varia.le wit* res)ect to t*e num.er ocones sol at a 3asins & Ro..ins*o)A, T*e cost o" lig*ting t*e store,

3, T*e wages o" t*e store manager,C, T*e cost o" ice cream,%, T*e cost o" na)ins "or customers,


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Cost Classi5cationsInicate w*et*er eac* o" t*e "ollowing costs incurre in a manu"aco)eration is 5;e or varia.le an w*et*er it is a )erio cost or )ro

a. Sales commissions

b. OLce rent "or sales )ersonnel

c. Salaries "or sales su)ervisors

d. OLce rental "or cost management sta0

e. Aministrative oLce *eating an air conitioning

f. Trans)ortation(in costs on materials )urc*ase !. Assem.ly(line worers6 wages

h. #ro)erty ta;es on oLce .uilings "or aministrative s

i. Salaries o" t*e com)any6s to) e;ecutives

j. Overtime )ay "or assem.ly worers,


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1earning O.2ective

%e5ne an give e;am)les o" classi5cations use in maing eci0erential costs4 o))ortunity costssun costs,

Cost Classi5cations "or %ecis


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Cost Classi5cations "or %ecisMaing

6Every ecision involves a c*oice .etwleast two alternatives,

6Only t*ose costs an .ene5ts t*at

.etween alternatives are relevant ecision, All ot*er costs an .ene5tan s*oul .e ignore,


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Juic C*ec Su))ose you are trying to ecie w*et*er to rivet*e train to Islama.a to atten a concert, Pou *avcas* to o eit*er4 .ut you on6t want to wasteneelessly, Is t*e cost o" t*e train ticet relevanecision In ot*er wors4 s*oul t*e cost o" t*e traa0ect t*e ecision o" w*et*er you rive or tae t*e

Islama.a

A, Pes4 t*e cost o" t*e train ticet is relevant,

3, No4 t*e cost o" t*e train ticet is not relevant


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Juic C*ec Su))ose you are trying to ecie w*et*er to tae t*e train to Islama.a to atten a conce*ave am)le cas* to o eit*er4 .ut you on6t waste money neelessly, Is t*e annual cost o" liyour car relevant in t*is ecision

A, Pes4 t*e licensing cost is relevant,

3, No4 t*e licensing cost is not relevant,


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"he potential benet that is !iven upwhenone alternative is selected over anothe

"he potential benet that is !iven upwhen

one alternative is selected over another

f you were not attendin!colle!e$ you could be

earnin! &'($((( per year. )our opportunity cost of attendin! colle!e forone year is &'($(((.

O))ortunity Costs


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#ast payments for resources that cannot bchan!ed by any current or future decision

#ast payments for resources that cannot be

chan!ed by any current or future decision.

Sunk costs should not be considered in decisions.

78ample9 :ou bought an automobile for ;%*,/// twoyears ago.


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Cost Classi5cations Inicate w*et*er eac* o" t*e "ollowing costs incurre in a manu"act

o)eration is inclue in )rime 7irect8 costs 7%84 conversion costs 7C738,

a. Assem.ly(line worer6s salary

b. %irect material use in )rouction

c. Inirect material use in )rouction

d. actory *eating an air conitioning

e. #rouction su)ervisor6s salary

f. Trans)ortation(in costs on materials )urc*ase,

riea 3ronowsi *as invente a new ty)e o" /yswatter, A"ter giving


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y) y g gt*oug*t, riea *as ecie to Kuit *er Q@4 )er mont* 2o. wit* a co)rouce an sell t*e /yswatter "ull time, riea will rent a garage t*at )rouction )lant, T*e rent will .e Q= )er mont*, riea will rent )rouca cost o" Q )er mont*,

T*e cost o" materials "or eac* /yswatter will .e Q,?, riea will *ire wt*e /yswatters, T*ey will .e )ai Q, "or eac* com)lete unit, riea wt*e *ouse ne;t oor "or use as *er sales oLce, T*e rent will .e Q )erarrange "or t*e tele)*one com)any to attac* a recoring to *er *ome*ours messages "rom customers, T*e evice will increase *er mont*ly )*o

riea *as some money in savings t*at is earning interest o" Q=4 )er ye

will .e wit*rawn an use "or a.out a year to get t*e .usiness go/yswatters4 riea will avertise *eavily in t*e local area, Avertising costmont*, In aition4 riea will )ay a sales commission o" Q,= "or eac* /y

or t*e time .eing4 riea oes not inten to raw any salary "rom t*e new*as alreay )ai t*e legal an 5ling "ees to incor)orate t*e .usiness, T*esQB,


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MACS-Session+1

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