akuntansi manajemen 5
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Akuntansi Manajemen 5TRANSCRIPT
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Segmented Reporting,Investment Center Evaluation
Chapter 10 HM
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1. How & Why adopting standard costing systems
2. State the purpose of a standard cost sheet.3. Describe basic concepts of variance
analysis4. Compute materials & labor variances5. Calculate variable & fixed overhead
variances.6. Prepare journal entries for variances
Last Meeting Review
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Fixed Overhead VariancesTotal FO Variances = Actual Fixed
Overhead – Applied Fixed Overhead
Applied Fixed overhead = (Standard fixed overhead rate) x (Standard hours allowed for actual production)
Budgeted fixed overhead = (Standard fixed overhead rate) x (Practical activity)
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Exercise 9-14
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Exercise 9-14Actual Fixed Overhead = $ 4,140,200Budgeted Fixed Overhead = 288,000 x
$14.4 = $4,147,200Applied Fixed Overhead = 280,000 x
$14.4 = $4,032,000
Fixed Overhead Spending Variance $ (7,000.00) F
Fixed Overhead Volume Variance $ 115,200.00 U
Total Fixec Overhead Variances $ 108,200.00 Underapplied
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1. Explain how & why firms choose to decentralize.
2. Explain the difference between absorption & variable costing, & prepare segmented income statements.
3. Compute & explain return on investment (ROI).
4. Compute & explain residual income & economic value added (EVA)
LEARNING OBJECTIVES
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Responsibility Accounting SystemManagement Control Systemmeasures the results of
responsibility centers according to information managers need to operate their centers
approaches to manage their diverse and complex activities: ◦centralized◦Decentralized freedom for lower
manager to make decision (autonomy)
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Management Control System Approach
LO 1
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Pros & Cons of Decentralization
Benefit• For ease of
gathering, using local information
• To focus central management
• To train & motivate segment managers,
• To enhance competition & expose segments to market forces
Cost• Leads to
suboptimal (incongruent) decision making
• Focuses the manager’s attention on the subunit rather than company as a whole
• Increase the costs of gathering information
• Results in duplication activities
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DivisionsFirm commonly desentralize by
creating ‘divisions’ differentiated by: ◦types of goods or services produced
◦geographic lines◦type of responsibility
Responsibility Center: Is a segment of the business whose manager is accountable for specified sets of activities
LO 1
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Decentralized Divisions Based on types of goods or
services produced
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Responsibility centersMajor types of responsibility centers are:
◦Cost centers Manager responsible for cost only
◦Revenue center Manager responsible for sales only
◦Profit center Manager responsible for sales & costs
◦Investment center Manager responsible for sales, costs, &
capital investment
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Measuring Performance of Profit Centers
2 ways to calculate income ◦absorption costing ◦variable costing (direct costing)
They differ in the treatment of fixed factory overhead.
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Inventory Valuation: Background
Units in beginning inventory 0Units produced 10,000Units sold ($300 per unit) 8,000Variable costs per unit
Direct materials $ 50 Direct labor 100 Variable overhead 50
Fixed costs Fixed overhead per unit produced 25 Fixed selling & administrative 100,000
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Absorption Costing Direct materials $ 50 Direct labor 100 Variable overhead 50 Fixed overhead per unit produced 25Unit product cost $ 225
Value of ending inventory =
2,000 x $ 225 = $ 450,000
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Variable Costing Direct materials $ 50 Direct labor 100 Variable overhead 50 Unit product cost $ 200
Value of ending inventory =
2,000 x $ 200 = $ 400,000
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Absorption Income Statement
Sales ($300 x 8,000) $ 2,400000Less Cost of goods sold 1,800,000Gross margin $ 600,000Less S&A expenses 100,000Operating income $ 500,000
CGS = 8,000 x $ 225
= $1,800,000
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Variable Income StatementSales $ 2,400,000Less variable expenses 1,600,000Contribution margin 800,000Less fixed costs 350,000Operating income $ 450,000
Variable costs: 8,000 x $200
Fixes costs: $250,000 + 100,000
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Absorption vs. Variable
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Absorption vs VariableGenerally accepted accounting principles (GAAP)
require absorption costing for external reportingvariable costing is an invaluable managerial tool,
can supply vital cost information for decision making and control
The difference between variable costing & absorption costing year to year is equal to the change in fixed overhead. ◦ Under absorption costing, fixed overhead is assigned to
inventory produced. ◦ Under variable costing, fixed overhead is a period expense
Absorption-costing income – Variable-costing income = Fixed overhead rate x (Units produced – Units sold)
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Exercise 10-3
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Solution1. Fixed Overhead Rate = 107500/ 25000 = 4.3
Perbedaan Income Absorpsi - Variable:=Fixed Overhead Rate x
(Unit Produced - Unit Sold) = $4.3 x (25000-23000)= $8,600
a. Income Statement Variable Costing
Sales $ 598,000 Less: Variable Expenses
Variable COGS $ 294,400 Variable Selling & Adm Expenses $ 92,000
$ 386,400 Contribution Margin $ 211,600 Less: Fixed Expenses
Fixed Overhead $ 107,500 Fixed Selling & Adm Expenses $ 26,800
$ 134,300 Operating Income $ 77,300
b. Income Statement Absorption Costing
Sales $ 598,000 Less: COGS $ 393,300 Gross Margin $ 204,700 Less: Selling & adm $ 118,800 Operating Income $ 85,900
85,900 – 77,300 = $8,600
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Evaluating Profit-Center Managers Variable costing ensures that direct
relationship between sales & income holds whereas absorption costing does not
The product cost under variable costing is $10 per unit for both years
the product cost under absorption costing is $20 per unit in 2007 and $30 per unit in 2008 (assuming expected actual volume used to compute predetermined FO rate)
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Under variable costing, income increased by $75,000 (from -$25,000 to a profit of $50,000).
However, under absorption costing, operating income decreased by $25,000 (from a profit of $25,000 to $0) despite the increase in sales!
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Segment ReportingSegment is a subunit of a
company of sufficient importance to warrant performance reports
Can be in form of: divisions, department, product lines, etc.
Fixed expenses on Segmented income statement:◦ Direct fixed expenses◦Common Fixed expenses
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Fixed ExpensesDirect fixed expenses are directly
traceable to a segment & therefore avoidable. If segment eliminated, so are expenses◦ i.e: rent for regional office /a product line
warehouseCommon fixed jointly caused by two or
more segments. These expenses persist even if one of the segments to which they are common is eliminated◦ i.e: CEO salary, headquarter building
depreciation
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Comparative income statementsSegment margin is contribution to firm’s common fixed costs.
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Exercise 10-4
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Measuring the Performance of Investment Centers Using ROIROI relates operating profits to
assets employed.
Operating income = earnings before interest and taxes
Operating assets = all assets acquired to generate operating income, including cash, receivables, inventories, land, buildings, and equipment
ROI = Operating Income
Average Operating Assets
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Margin & TurnoverMargin tells how many cents of
operating income result from each dollar of sales
Turnover tells how many dollars of sales result from every dollar invested in operating assets.
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Exercise 10-6
OI = sales – expenses = 50.000 – 48.000 = 2.000 Margin = OI/Sales = 2.000/50.000 = 4% Turnover = Sales/Operating asset = 50.000/10.000 = 5x ROI = Margin x Turnover = 4% x 5 = 20%
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Illustration
Computing the margin and turnover ratios for each division gives a better picture of what caused the change in rates
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ROI Pros & ConsPros
• Encourages managers to focus on• Relationship
among sales, expenses
• Cost efficiency• Operating asset
efficiency
Cons• Can product a
narrow focus on divisional profitability at expense of profitability for overall firm
• Encourages managers to focus on short run at expense of long run
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Focus on short run at expense of long run - exampleLay off five of the highest-paid
salespeople.Cut the advertising budget for the
fourth quarter by 50 percent.Delay all promotions within the division
for three months.Reduce the preventive maintenance
budget by 75 percent.Use cheaper raw materials for fourth-
quarter production.
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Measuring the Performance of Investment Centers Using Residual IncomeResidual income is the difference
between operating income and minimum dollar return on sales.
Minimum rate of return = hurdle rate of the divisions/projects
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ADVANTAGES & DISADVANTAGES: Residual Income
Advantage• Gives
another view of project profitability
Disadvantages
• Can encourage short run orientation
• Direct comparisons are difficult
LO 4
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Exercise 10-11
Required Compute Residual Income of each scenario Compute ROI of each scenario
◦ The MP3 player is added.◦ The voice recorder is added.◦ Both investments are added.◦ Neither investment is made; the status quo is maintained
Which alternatives that should manager choose, if the performance evaluation based on (1) ROI, (2) Residual Income?
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AnswerROI MP3 Player 14.50%ROI Voice recorder 14.00%Residual Income MP3 Player $20,000.00 Residual Income Voice Recorder $15,000.00
Alternatives Without Investment MP3 Player Voice recorder Both Projects
Operating income 2,700,000.00 2,816,000.00 2,805,000.00 2,921,000.00
Operating Asset 18,000,000.00 18,800,000.00 18,750,000.00 19,550,000.00
ROI 15.00% 14.98% 14.96% 14.94%
Minimum required rate 12% 12% 12% 12%
Residual income 540,000.00 560,000.00 555,000.00 575,000.00
ROI: Loss on not selecting both project
Operating income if invested in assets $221,000
operating asset $1,550,000
Fund invested at 12% $186,000
Loss on not invest in projects $35,000
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Economic Value Added (EVA)EVA links net income (return) to capital
employed
EVA is a dollar figure, not a percentage rate of return (as a form of residual income)
if EVA is positive, then the company is creating wealth; if EVA is negative, then the company is destroying wealth
Economic value added (EVA)
= After Tax Operating Income – (% cost of capital x
Capital employed)
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Cost of Capital◦C* = [y x (Equity/CAPITAL)] + (1+t) x i x (Debt/CAPITAL)
y = required rate of return on equity
t = marginal tax ratei = interest rate for debtCapital = equity + debt
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Illustration EVA calculation
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THE END
CHAPTER 10