Download - ZCMA 6022 : MANAGERIAL ACCOUNTING
ZCMA 6022 : MANAGERIAL ACCOUNTING
ASSESSMENT ASSESSMENT AMONG THE ACTIVITIES Individual Activities 1
2 3 4 5
Exercise 1,2,3,4 5% each 20% 2 Group Project Individual Assignment
I,II,III, IV, V 6% each 30% 3 Group Oral Presentation 10% Group 5%
4 Final Write Up 40% Group Assignment I,II,III 15% Individual
Assignment I,II,III, IV, V 25% 5 TOTAL 100% AMONG THE ACTIVITIES
Group Project Individual Assignment I,II,III, IV, V
Each Individual Assignment will consists of THREE MAIN COMPONENTS 1
Preparation/ Calculation/ Concept & Analytical Review 2% 2
Comparative to another type of organization: Eg: Service Company vs
Manufacturing Company 3 Role Play As BOD what information will I be
looking at on Sales Budget? TOTAL 6% Group Project Final Write Up
Group Assignment I,II,III
Marks TOTAL FINAL MARKS 1 Company Background 10 2 5% 2 Master
Budget 3 Cost-Volume-Profit Analysis TOTAL 15% Group Assignment is
part of Final Write Up. Failing to work as a team will result in
points being deducted Group Project Final Write Up I,II,III, IV, V
[Individual]
Each Individual Assignment will consists of THREE MAIN COMPONENTS
Marks 1 Company Background 10 2 Planning 25 3 Directing Operation
35 4 Decision Making 15 5 Performance Evaluation (Control) 6
Summary Total Marks 75 TOTAL FINAL MARKS (75 3) 25% Where are we?
Where are we heading? What are we doing today?
PLAN DIRECTING OPERATION DECISION MAKING CONTROL Where are we
heading? What are we doing today? MANAGERIAL ACCOUNTING
MODULE 2 Managerial Accounting : Costing Part 1 Prepared by: Nasuha
Nordin ZCMA 6022 : Managerial Accounting Topics for Module 2
Product Cost Process Cost Cost Behavior
Cost Estimation Costing Topics for Module 2 WEATHERMASTER WINDOW
SDN BHD
MAIN OPERATION In bound Process Out bound SUPPORTING ACTIVITIES HR
MARKETING GENERAL ADMINISTATION Operational Flow WEATHERMASTER
WINDOW SDN BHD
MAIN OPERATION In bound Process Out bound RAW MATERIAL : FRAME
FRAME DIVISION LOGISTIC WAREHOUSE WIP FINISHED GOODS : FRAMED
WINDOW GLASS DIVISION RAW MATERIAL : WINDOW GLASS Manufacturing
Cost Flows
3-11 Manufacturing Cost Flows BALANCE SHEET COST INCOME STATEMENT
Material Purchases Raw Materials Manufacturing Overhead Work
inProcess Direct Labor Finished Goods Cost ofGoods Sold Part I All
raw materials, work in process, and unsold finished goods at the
end of the period are shown as inventoriable costs in the asset
section of the balance sheet. Part II As finished goods are sold,
their costs are transferred to cost of goods sold in the income
statement. Part III Selling and administrative expenses are not
involved in making the product; therefore, they are treated as
period costs and reported in the income statement for the period
the cost is incurred. Selling and Administrative Period Costs
WEATHERMASTER WINDOW SDN BHD
MAIN OPERATION In bound Process Out bound RAW MATERIAL WORK IN
PROGRESS FINISHED GOODS BALANCE SHEET ASSET - INVENTORIES
WEATHERMASTER WINDOW SDN BHD
MAIN OPERATION In bound Process Out bound RAW MATERIAL WORK IN
PROGRESS FINISHED GOODS INCOME STATEMENT COST OF GOODS SOLD
WEATHERMASTER WINDOW SDN BHD
MAIN OPERATION IN BOUND COST OF PURCHASE: FRAME WINDOW GLASS RAW
MATERIAL COST OF PURCHASE BALANCE SHEET : INVENTORY INCOME
STATEMENT : COST OF GOODS SOLD ` WEATHERMASTER WINDOW SDN BHD
MAIN OPERATION PROCESS COST OF PURCHASE: FRAME WINDOW GLASS WORK IN
PROGRESS COST OF LABOUR BALANCE SHEET: INVENTORY COST OF RAW
MATERIAL INCOME STATEMENT : COGS ` MANUFACTURING OVERHEAD
WEATHERMASTER WINDOW SDN BHD
MAIN OPERATION PROCESS COST OF PURCHASE: FRAME WINDOW GLASS
FINISHED GOODS INCOME STATEMENT : COST OF GOODS SOLD BALANCE SHEET:
INVENTORY ` WEATHERMASTER WINDOW SDN BHD
MAIN OPERATION In bound Process Out bound SUPPORTING ACTIVITIES HR
MARKETING GENERAL ADMINISTATION Operational Flow WEATHERMASTER
WINDOW SDN BHD
MAIN OPERATION In bound Process Out bound ALL COST THAT IS ASSIGNED
TO GOODS THAT WERE EITHER PURCHASED OR MANUFACTURED IS PRODUCT COST
WEATHERMASTER WINDOW SDN BHD
SUPPORTING ACTIVITIES HR MARKETING GENERAL ADMINISTATION ALL COST
THAT IS NOT PRODUCT COST IS PERIOD COST Activity 1 : Group
Discussion
You may discuss with yourGroup Project groups on yourown Operation
Flow DIRECT COST INDIRECT COST PRODUCT COST Product Cost PRODUCT
COSTING Cost Accumulation Cost Measurement Cost Assignment
Record Costs Classifies Costs Assigns costs to Cost Objects
Purchase materials Direct material Product 2 Product 1 Assemblers
wages Finishers wages Direct labour Manufacturing overhead
Supervisory salary Factory depreciation Other Factory depreciation
COST ACCUMULATION : - Refers to recognition and recording of costs
- Source documents are require as evidences to record costs and to
keep track of product costs as they occur. E.g. Material
requisition form - to determine total material used in production (
direct material, indirect material) COST MEASUREMENT: - Refers to
cost classification that determines the dollar amount of direct
materials, direct labours and manufacturing overhead used in the
production. - Two ways to measure Actual costing Normal costing
Non-Profit Organization
Non Manufacturing DM, DL, DOH Merchandising cost of buying and
transporting merchandise Service cost of providing service (eg:
cost of cashierstaff, cost of fuel to provide
transportationservice) Non-Profit Organization cost of organizing
non-profit events (eg: cost floodrelief activities) Objective: To
determine product cost or unit costs of product /service Product
Cost Non-Profit Organization
Non Manufacturing Selling expenses, General and & Admin
expenses Merchandising Service Non-Profit Organization Process Cost
Why do need to know product cost?
Objective: To determine product cost or unit costs of product
/service How do we calculate product cost?
COST MEASUREMENT: Refers to cost classification that determines the
dollar amount of direct materials, direct labours and manufacturing
overhead used in the production. Two ways to measure Actual costing
Normal costing COST MEASUREMENT: ACTUAL VS NORMAL
Direct Material Actual Direct Labour OH Predetermined ONLY KNOWN AT
END OF THE ACCOUNTING PERIOD, IN WHICH MAY NO LONGER BE RELEVANT
INFORMATION FOR DECISION MAKING OR PLANNING KNOWN BEFORE END OF
ACCOUNTING PERIOD In practice, normal costing is more preferable
than actual costing Actual costing is not known until after the end
of the accounting period therefore, cost of product would not
available in a timely fashion Variations in production due to
seasonal factors causes the manufacturing overhead cots per unit
fluctuate ACTUAL VS NORMAL COSTING EXAMPLE Normal Costing Actual
Costing
WEATHERMASTER WINDOW SDN BHD SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE MONTH OF NOVEMBER 20X1 Normal Costing Actual Costing $
Manufacturing Overhead (actual) Frame Division 18,050 Glass
Division 11,000 29,050 Manufacturing Overhead (normal) 17,895
10,905 28,800 UNDER APPLIED BY $250 Budgeted manufacturing overhead
cost
How do we get thePredetermined Overhead? Budgeted manufacturing
overhead cost COST TRACING AND ALLOCATION/APPLICATION
COST ASSIGNMENT BUDGETED MANUFACTURING COST DM + DL COST TRACING
AND ALLOCATION/APPLICATION Direct costs cost tracing to products
Indirect costs cost allocating to products using arbitrary method
Traditional methods: single plant wide rate and departmental rate
Activity based costing DOH What is JOB COSTING? Product Cost is a
general application of cost assignment, when : The company only has
a few product that is almost similar The company has easy to manage
job orders The company has a simple overall structure Another way
of looking at product costing is by using job costing Job order
costing accumulates thecosts for a specific customersorder because
the orders tend tovary from customer to customer JOB COSTING
Product Cost is a general application of cost assignment, when :
The company only has a few product that is almost similar The
company has easy to manage job orders The company has a simple
overall structure Another way of looking at product costing is by
using job costing Job-Order Costing POHR
The total direct material, direct labor, and manufacturing overhead
costs assigned to Job A-143 is $236. Since this particular job
included 2 units of production, the average cost per unit is $118.
We calculated the average cost by dividing the total cost of $236
by the 2 crates produced. JOB COSTING What is POHR ?
Product Cost is a general application of cost assignment, when :
The company only has a few product that is almost similar The
company has easy to manage job orders The company has a simple
overall structure Another way of looking at product costing is by
using job costing OVERHEAD APPLICATION Overhead is applied to jobs
using a PREDETERMINEDOVERHEAD RATE (POHR) based on estimates made
atthe beginning of the accounting period. POHR= Budgeted
manufacturing overhead cost Budgeted amount of cost driver (or
activity base) Based on estimates, and determined before the period
begins Actual amount of the allocation base, such as direct labor
hours, incurred during the period Overhead applied=POHR Actual
activity Job-Order Costing - Document Flow Summary
3-36 Job-Order Costing - Document Flow Summary Materials used may
be either direct or indirect. Direct materials Job Cost Sheets COST
ALLOCATION COST TRACING Materials Requisition Indirect materials
From Manufacturing Overhead Account Job-Order Costing - Document
Flow Summary
3-37 Job-Order Costing - Document Flow Summary An employees time
may be either direct or indirect. Direct Labor Job Cost Sheets COST
ALLOCATION COST TRACING Employee Time Ticket Indirect Labor
Manufacturing Overhead Account Job-Order Costing - Document Flow
Summary
3-38 Job-Order Costing - Document Flow Summary COST ALLOCATION
Employee Time Ticket Indirect Labor COST TRACING Other Actual OH
Charges Manufacturing Overhead Account Applied Overhead Job Cost
Sheets Indirect Material Materials Requisition COST ALLOCATION LETS
LOOK AT AN ILLUSTRATION Job Costing : Service Company
Product Cost is a general application of cost assignment, when :
The company only has a few product that is almost similar The
company has easy to manage job orders The company has a simple
overall structure Another way of looking at product costing is by
using job costing Activity 2 : Exercise 2 Job Order Costing in
Consulting Firm
Please complete the Question Distributedand Submit before you leave
using softcopyin IFOLIO or Handwritten Hardcopy Job Order Costing
in Consulting Firm (40 minutes) Problem 3-48 (Hilton and Platt
2015) 5% of total Assessment Marks Good Luck! ANSWER MANAGERIAL
ACCOUNTING
MODULE 2 : Managerial Accounting : Costing Prepared by: Nasuha
Nordin ZCMA 6022 : Managerial Accounting What is Process Costing?
Process costing is used inrepetitive productionenvironments where
largenumbers of identical or verysimilar products aremanufactured
in a continuousflow Process Cost MANUFACTURING OVERHEAD FINISHED
GOODS INVENTORY
DIRECT MATERIAL DIRECT LABOUR MANUFACTURING OVERHEAD Job 2 Job 1
Job 3 FINISHED GOODS INVENTORY COST OF GOODS SOLD JOB COSTING
FINISHED GOODS INVENTORY MANUFACTURING OVERHEAD
JOB COSTING Job 2 Job 1 Job 3 DIRECT MATERIAL DIRECT LABOUR
FINISHED GOODS INVENTORY COST OF GOODS SOLD MANUFACTURING OVERHEAD
WIP Inventory Prodn Dept A
WIP Inventory Prodn Dept B Finished Goods Inventory PROCESS COSTING
Cost of Goods Sold Main difference JOB COSTING PROCESS
COSTING
Cost areaccumulatedby job order Cost areaccumulatedby department
Main difference What Have We Learn So Far? How do we identify
cost,we first must know thevarious behavior of cost
Cost Behavior VARIABLE COST VS. FIXED COSTS COST CLASSIFICATIONS
FOR PREDICTING COST BEHAVIOR
3-51 COST CLASSIFICATIONS FOR PREDICTING COST BEHAVIOR How a cost
will react tochanges in the level ofactivity within therelevant
range. Total variable costs changewhen activity changes. Total
fixed costs remainunchanged when activitychanges. Quite frequently,
it is necessary to predict how a certain cost will behave in
response to a change in activity. For example, a manager may want
to estimate the impact that a 5% increase in sales would have on
the companys total electric bill. Cost behavior refers to how a
cost will react to changes in the level of activity within the
relevant range. The most commonly used classifications of cost
behavior are variable and fixed costs. Your total texting bill is
based on how many texts you send.
3-52 VARIABLE COST Your total texting bill is based on howmany
texts you send. Number of Texts Sent Total Texting Bill A variable
cost varies in direct proportion to changes in the level of
activity. For example, if you dont have a texting plan on your cell
phone, text messaging costs 5 cents per text.Your total texting
bill increases with the number of texts you send. The cost per text
sent is constant at
3-53 VARIABLE COST PER UNIT The cost per text sent is constant at 5
cents per text. Number of Texts Sent Cost Per Text Sent Although
variable costs change in total as the activity level rises and
falls, variable cost per unit is constant. For example, the cost
per text message sent is constant at 5 cents per text. FIXED COST
Monthly Cell Phone Contract Fee
3-54 FIXED COST Your monthly contract fee for your cell phone is
fixedfor the number of monthly minutes in your contract.Themonthly
contract fee does not change based on thenumber of calls you make.
Number of Minutes Used Within Monthly Plan Monthly Cell Phone
Contract Fee A fixed cost is constant within the relevant range. In
other words, fixed costs do not change for changes in activity that
fall within the relevant range. For example, your monthly contract
fee for your cell phone is a fixed amount for a certain number of
minutes.The monthly contract fee does not change based on the
number of calls you make. Of course, if you go over your monthly
minutes allotment, you have exceed the relevant range for your
monthly contract and will be charged above and beyond your monthly
contract fee. FIXED COST PER UNIT Monthly Cell Phone Contract
Fee
3-55 FIXED COST PER UNIT Within the monthly contract allotment, the
average fixed costper cell phone call made decreases as more calls
are made. Number of Minutes Used Within Monthly Plan Monthly Cell
Phone Contract Fee However, when expressed on a per unit basis, a
fixed cost is inversely related to activitythe per unit cost
decreases when activity rises and increases when activity falls.For
example, the average fixed cost per cell phone call made decreases
as more calls are made in the month. COST CLASSIFICATIONS FOR
PREDICTING COST BEHAVIOR
3-56 COST CLASSIFICATIONS FOR PREDICTING COST BEHAVIOR It is
helpful to think about variable and fixed cost behavior in a 2x2
matrix, as illustrated here.Take a few minutes and review this
summary of cost behavior for variable and fixed costs. Total cost
remains constant within a narrow range of activity.
Step-Variable Costs Total cost remains constant within a narrow
range of activity. Cost Some costs are nearly variable, but they
increase in small steps instead of continuously.Such costs, called
step-variable costs, usually include inputs that are purchased and
used in relatively small increments.For a narrow range of activity,
the total cost remains the same.For example, the hourly rate for
cashiers at a local grocery store is constant.During hours when
there are few customers only 3 cashiers are needed.Therefore, at
these low activity levels, the total cost for cashiers is the
same.(LO2) Activity Step-Variable Costs Total cost increases to
anew higher cost for the next higher range of activity. Cost But
when the number of customers increases, the number of cashiers
required increases.The hourly rate, or cost per unit, stays the
same but the total cost increases at the next higher range of
activity.(LO2) Activity Step-Fixed Costs Continue
Example: Office spaceis available at a rentalrate of $30,000 per
yearin increments of 1,000square feet.As thebusiness grows
morespace is rented,increasing the total cost. Some costs remain
fixed over a wide range of activity but jump to a different amount
for activity levels outside that range. Such costs are called
step-fixed costs. (LO2) Continue Rent Cost in Thousands of
Dollars
Step-Fixed Costs Total cost doesnt change for a wide range of
activity, and then jumps to a new higher cost for the next higher
range of activity. 90 60 Rent Cost in Thousands of Dollars A
company may rent office space at the cost of $30,000 per 1,000
square feet.But it is only available in increments of 1,000 square
feet.The rent remains $30,000 regardless of activity.As business
increases, more square footage is needed.The next 1,000 square feet
costs another $30,000.As the company expands, another 1,000 square
feet is needed, costing another $30,000.(LO2) 30 01, , , Rented
Area (Square Feet) Slope is variable cost per unit of
activity.
Semi-variable Cost Slope is variable cost per unit of activity.
Total semivariable cost VariableUtility Charge Total Utility Cost
The companys monthly bill would always be at least $1,500, the
fixed portion of the lease.The total cost would rise from $1,500,
depending on how hours were used.Therefore, the slope of a total
cost line is the variable cost per unit of activity.(LO2) Fixed
Monthly Utility Charge Activity (Kilowatt Hours) OTHER COST
BEHAVIOR Engineered Cost Committed Cost Discretionary Cost
Bears a definitive physical relationship to theactivity measure
(eg: material cost) Committed Cost Results from an organization
ownership or usefacilities (eg: rental, income tax) Discretionary
Cost Result of a management decision to spend aparticular amount of
money for some purpose,which can be changed in the short run (eg:
OTHER COST BEHAVIOR OTHER COST BEHAVIOR Controllable Cost
Uncontrollable Cost
A cost that a manager can control or heavilyinfluence the level of
cost (eg: cost of food usedin restaurant) Uncontrollable Cost A
cost a manager has no control or influenceover (eg: advertising
cost allocated by HQ) OTHER COST BEHAVIOR Activity 3 : Class
discussion
Lets have a quick discussion onCost Behavior of
differentorganization How do we estimate cost? Cost Estimation Cost
Estimation TABLE GRAPH Account-Classification Visual-Fit
Method
High-Low Method Least Square Regression Method Multiple Regression
Method Engineering Method TABLE GRAPH What is the use of Cost
Estimation? Cost Estimation Account Classification :
Classifies ledger accounts to either Fixed cost Variable cost
Semi-variable cost Cost Estimation Visual-Fit Method Suitable for
semi-variable cost
Plot observation Scatter diagram Intercept = FC VC = Semi-Variable
Cost (-) FC Cost Estimation High-Low Method
Use for semi-variable costapproximation Variable Cost Per unit =
(HIGHEST COST - LOWEST COST )/ (HIGHEST ACTIVITY - LOWEST ACTIVITY
Cost Estimation Least Square Regression Method Y = a + b1X1 Cost
Estimation Multiple Regression Method Y = a + b1X1+ b2X2 Cost
Estimation Engineering Method
How much needed and how muchit cost Not relying so much on
historicaldata Account Classification
Cost Estimation Account Classification Engineering Method easy to
use for simpleorganization more complex to explainwithout in depth
experienceon the expenditure may get varied analysis dueto
dependencies ofprofessional judgement forward looking comprehensive
informationof activities involved and costinvolved lack of
objectivity : eg: twocost analyst may give todifferent report Time
Consuming andexpensive Account Classification
Cost Estimation Account Classification Visual-Fit Method easy to
use for simpleorganization more complex to explainwithout in
depthexperience on theexpenditure may get varied analysisdue to
dependencies ofprofessional judgement Easy to explain with
sufficientknowledge, analyst isable to spot outliers lack of
objectivity : eg:two cost analyst maygive to different report Cost
Estimation High-Low Method Visual-Fit Method
easy to use for simpleorganization only uses high and lowpoints of
data lack of objectivity Easy to explain with sufficientknowledge,
analyst isable to spot outliers lack of objectivity : eg:two cost
analyst maygive to different report Least Square Regression
Method
Cost Estimation Visual-Fit Method Least Square Regression Method Y
= a + b1X1 Easy to explain with sufficientknowledge, analyst isable
to spot outliers Make use of all availabledata lack of objectivity
: eg:two cost analyst maygive to different report Easy to explain
with sufficient knowledge,analyst is able to spot outliers Make use
of all available data objective outcome economic plausibility
Goodness of fit (R2) Economic plausibility : whether the regression
line makes sense : whether x causes y (these can be determined
through literature review or professional judgement and experience)
Goodness of fit : Least Square Regression Method
Cost Estimation Multiple Regression Y = a + b1X1+ b2X2 Least Square
Regression Method Y = a + b1X1 Easy to explain with sufficient
knowledge,analyst is able to spot outliers Make use of all
available data objective outcome economic plausibility Goodness of
fit (R2) Easy to explain with sufficient knowledge,analyst is able
to spot outliers Make use of all available data objective outcome
more complex and requiresmore statistical capabilities economic
plausibility Goodness of fit (R2) Economic plausibility : whether
the regression line makes sense : whether x causes y (these can be
determined through literature review or professional judgement and
experience) Goodness of fit : R sqr >0.8 goodness of fit is ok
Cost Estimation can be used in allstages of managerial
accounting:
Plan Decision Making Directing Operation Control Cost Estimation
Cost Estimation also helps toascertain the behavior of costso that
an estimation of costcan or cant be allocated Cost Estimation
Scenario: Donuts bakery need to identify the behavior of Utilities
cost using cost estimation techniques Cost Estimation Cost Behavior
Identify relevant cost behaviors to your organization Identify the
cost/ expense to be analyzed Cost Estimation Identify relevant cost
estimation methods Ascertain whether the cost is FC, VC,
Semi-Variable, Step FC, Step VC Use the Cost Estimated Cost
estimated Fixed -> cost cant be allocated directly to specific
job and the cost will not be effected by level of activities
Variable -> cost may be allocated directly to specific job and
the cost is expected to varies with level of activities /
production Semi-Variable -> cost consists of both fixed and
variable, hence a portion cant be directly allocated and the other
can be directly allocated and the cost is expected to have unvaried
portion and varied portion Cost Behavior The relevant cost
behaviors are : Fixed Cost, Variable Cost, Semi-Variable Cost Cost
to be analyzed : Utilities Cost Estimation Cost Estimation Methods
: Account-Classification OR Visual-Fit Method OR High-Low Method OR
Least Square Regression Method OR Engineering Method Use of Cost
Estimated Cost estimated Using Method above: (1) Utilities is found
to be Semi-Variable Cost, and (2) Utilities FC = $1,500 VC =
$0.05/unit Activity 4 : Group Project Individual Assignment
II
Team Name: Team Member Cost Estimation Team Member Name 1
Accounting Analysis 2 Engineering Method 3 High Low Method Visual
Fit Method 5 Least Square Regression Method Lets get busy! Costing
Absorption Costing ABC Target Costing Life Cycle Costing COSTING
When seeking to make profit on a product it is essential that the
total revenue arising from the product exceeds total costs, whether
the costs are incurred before, during or after the product is
produced ACCA Global, 2015 Life Cycle Costing Life Cycle Costing
Target Cost = Target Price (-) Target Profit There are 7 key
principles to target Cost:
Price led costing Focus on customer Focus on product design Focus
on process design Cross functional teams Life cycle costs Value
chain orientation Target Cost Price led costing Focus on customer
Focus on product design Focus on process design Cross functional
teams Life cycle costs Value chain orientation Which Approach
should Target cost take on. Traditional costing. ABC
Which Approach should Target cost take on? Traditional costing?
ABC? Engineering costing? Target Cost Price led costing Focus on
customer Focus on product design Focus on process design Cross
functional teams Life cycle costs Value chain orientation
ABSORPTION VS. VARIABLE COSTING
Absorption Costing Sales Cost of good sold Beginning inventory +
Cost of goodmanufactured Goods available forsale - Ending inventory
Gross margin Selling &administrativeexpenses Net operating
income Variable costing Sales Variable costs Variable Costs of good
sold Beginning inventory + Cost of goodmanufactured Goods available
for sale - Ending inventory Selling& administrative
Contribution margin Fixed costs Manufacturing overhead Selling
& administrative Net operating income