ZCMA 6022 : MANAGERIAL
ACCOUNTING
ASSESSMENT
Activities
Individual
1
Exercise 1,2,3,4
5% each
20%
2
Group Project – Individual
Assignment I,II,III, IV, V
6% each
30%
3
4
5
Group Oral Presentation
Group
Individual
Final Write Up
Group Assignment I,II,III
Individual Assignment
I,II,III, IV, V
TOTAL
5%
5%
15%
25%
10%
40%
100%
AMONG THE ACTIVITIES
2
Group Project – Individual
Assignment I,II,III, IV, V
Each Individual Assignment will consists of THREE MAIN
COMPONENTS
1
2
Preparation/ Calculation/ Concept
&
Analytical Review
2%
Comparative to another type of organization:
2%
Eg:
Service Company vs Manufacturing Company
3
Role Play
Eg:
As BOD what information will I be looking at on Sales
Budget?
TOTAL
2%
6%
Group Project – Final Write Up
Group Assignment I,II,III
Marks
1
Company Background
2
Master Budget
3
Cost-Volume-Profit Analysis
TOTAL
FINAL
MARKS
10
÷2
10
÷2
10
÷2
TOTAL
Group Assignment is part of Final Write Up.
Failing to work as a team will result in points being deducted
5%
5%
5%
15%
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)
15
6
Summary
5
Total Marks
75
TOTAL FINAL MARKS (75÷ 3)
25%
PLAN
DIRECTING
OPERATION
DECISION
MAKING
CONTROL
MODULE 2
Managerial Accounting : Costing Part 1
ZCMA 6022 : Managerial Accounting
Prepared by:
Nasuha Nordin
1.Product Cost
2.Process Cost
3.Cost Behavior
4.Cost Estimation
5.Costing
Topics for Module 2
MAIN OPERATION
In bound
Process
Out
bound
SUPPORTING ACTIVITIES
HR
1.
MARKETING
GENERAL
ADMINISTATION
MAIN OPERATION
In bound
Process
RAW MATERIAL :
FRAME
FRAME
DIVISION
WAREHOUSE
RAW MATERIAL :
WINDOW GLASS
WIP
GLASS
DIVISION
Out
bound
LOGISTIC
FINISHED GOODS :
FRAMED WINDOW
COST
BALANCE SHEET
Material Purchases
Raw Materials
Direct Labor
Work in
Process
Manufacturing
Overhead
Selling and
Administrative
Finished
Goods
Period Costs
INCOME
STATEMENT
Cost of
Goods
Sold
Selling and
Administrative
MAIN OPERATION
In bound
Process
RAW
MATERIAL
WORK IN
PROGRESS
Out
bound
FINISHED
GOODS
BALANCE SHEET – ASSET - INVENTORIES
MAIN OPERATION
In bound
Process
RAW
MATERIAL
WORK IN
PROGRESS
Out
bound
FINISHED
GOODS
INCOME STATEMENT– COST OF GOODS SOLD
MAIN OPERATION
IN BOUND
COST OF PURCHASE:
1. FRAME
2. WINDOW GLASS
RAW
MATERIAL
COST OF
PURCHASE
INCOME
BALANCE STATEMENT :
COST OF
SHEET :
INVENTORY GOODS SOLD
MAIN OPERATION
PROCESS
COST OF PURCHASE:
1. FRAME
2. WINDOW GLASS
INCOME
STATEMENT :
COGS
WORK IN
PROGRESS
COST OF
RAW
MATERIAL
COST OF
LABOUR
MANUFACTURING
OVERHEAD
BALANCE
SHEET:
INVENTORY
MAIN OPERATION
PROCESS
COST OF PURCHASE:
1. FRAME
2. WINDOW GLASS
FINISHED
GOODS
BALANCE SHEET:
INVENTORY
INCOME
STATEMENT :
COST OF
GOODS SOLD
MAIN OPERATION
In bound
Process
Out
bound
SUPPORTING ACTIVITIES
HR
1.
MARKETING
GENERAL
ADMINISTATION
MAIN OPERATION
In bound
Process
Out
bound
ALL COST THAT IS ASSIGNED TO GOODS
THAT WERE EITHER PURCHASED OR
MANUFACTURED IS PRODUCT COST
SUPPORTING ACTIVITIES
HR
MARKETING
GENERAL
ADMINISTATION
ALL COST THAT IS NOT PRODUCT COST IS
PERIOD COST
Activity 1
You may discuss with your
Group Project groups on your
own Operation Flow
DIRECT
COST
PRODUCT
COST
INDIRECT
COST
2.
PRODUCT COSTING
Cost Accumulation
Record Costs
Purchase materials
Cost Measurement
Classifies Costs
Direct material
Product 1
Assemblers’ wages
Finishers’ wages
Direct labour
Product 2
Supervisory salary
Factory depreciation
Other Factory
Cost Assignment
Assigns costs to Cost Objects
Manufacturing
overhead
depreciation
22
1. Non Manufacturing
DM, DL, DOH
2. Merchandising
cost of buying and transporting
merchandise
3. Service
cost of providing service (eg: cost of cashier
staff, cost of fuel to provide transportation
service)
4. Non-Profit Organization
cost of organizing non-profit events (eg: cost flood
relief activities)
2.
1. Non Manufacturing
Selling expenses, General and & Admin expenses
2. Merchandising
Selling expenses, General and & Admin expenses
3. Service
Selling expenses, General and & Admin expenses
4. Non-Profit Organization
Selling expenses, General and & Admin expenses
2.
Why do need to know
product cost?
2.
How do we calculate
product cost?
2.
COST MEASUREMENT:
ACTUAL VS NORMAL
Direct Material
Direct Labour
OH
ACTUAL
Actual
Actual
Actual
ONLY KNOWN AT END OF THE
ACCOUNTING PERIOD, IN
WHICH MAY NO LONGER BE
RELEVANT INFORMATION FOR
DECISION MAKING OR
PLANNING
NORMAL
Actual
Actual
Predetermined
KNOWN BEFORE END OF
ACCOUNTING PERIOD
ACTUAL VS NORMAL COSTING EXAMPLE
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
Glass Division
18,050
UNDER APPLIED
BY $250
11,000
29,050
Manufacturing Overhead (normal)
Frame Division
17,895
Glass Division
10,905
28,800
How do we get the
Predetermined Overhead?
Budgeted manufacturing overhead cost
COST ASSIGNMENT
BUDGETED MANUFACTURING COST
DM + DL
*
DOH
30
What is JOB COSTING?
Job order costing accumulates the
costs for a specific customer’s
order because the orders tend to
vary from customer to customer
Job-Order Costing
POHR
What is POHR ?
OVERHEAD APPLICATION
Overhead is applied to jobs using a PREDETERMINED
OVERHEAD RATE (POHR) based on estimates made at
the beginning of the accounting period.
POHR =
Budgeted manufacturing overhead cost
Budgeted amount of cost driver (or activity base)
Overhead applied = POHR × Actual activity
Based on estimates, and
determined before the
period begins
Actual amount of the allocation
base, such as direct labor hours,
incurred during the period
35
Job-Order Costing - Document Flow Summary
Materials used
may be either
direct or
indirect.
Direct
materials
Job Cost
Sheets
COST
TRACING
Materials
Requisition
COST
ALLOCATION
Indirect
materials
Manufacturing
Overhead
Account
Job-Order Costing - Document Flow Summary
An employee’s
time may be either
direct or indirect.
Direct
Labor
Job Cost
Sheets
COST
TRACING
Employee Time
Ticket
COST
ALLOCATION
Indirect
Labor
Manufacturing
Overhead
Account
Job-Order Costing - Document Flow Summary
COST
ALLOCATION
Employee
Time Ticket
Indirect
Labor
COST TRACING
Other
Actual OH
Charges
Materials
Requisition
Manufacturing
Overhead
Account
Indirect
Material
COST
ALLOCATION
Applied
Overhead
Job Cost
Sheets
LET’S LOOK AT AN ILLUSTRATION
Job Costing : Service Company
Activity 2
Please complete the Question Distributed
and Submit before you leave using softcopy
in 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
MODULE 2 : Managerial Accounting : Costing
ZCMA 6022 : Managerial Accounting
Prepared by:
Nasuha Nordin
What is Process Costing?
3.
Process costing is used in
repetitive production
environments where large
numbers of identical or very
similar products are
manufactured in a continuous
flow
3.
JOB COSTING
DIRECT
MATERIAL
Job 1
DIRECT
LABOUR
Job 2
MANUFACT
URING
OVERHEAD
Job 3
FINISHED
GOODS
INVENTORY
COST OF
GOODS
SOLD
JOB COSTING
DIRECT
MATERIAL
Job 1
DIRECT
LABOUR
Job 2
MANUFACT
URING
OVERHEAD
Job 3
FINISHED
GOODS
INVENTORY
COST OF
GOODS
SOLD
WIP Inventory Prodn Dept A
WIP Inventory Prodn Dept B
Finished Goods
Inventory
PROCESS
COSTING
Cost of Goods
Sold
JOB COSTING
Cost are
accumulated
by job order
PROCESS COSTING
Cost are
accumulated
by department
Main difference
What Have We Learn So Far?
How do we identify cost,
we first must know the
various behavior of cost
4.
How a cost will react to
changes in the level of
activity within the
relevant range.
* Total variable costs change
when activity changes.
* Total fixed costs remain
unchanged when activity
changes.
Total Texting Bill
Your total texting bill is based on how
many texts you send.
Number of Texts Sent
The cost per text sent is constant at
Cost Per Text Sent
5 cents per text.
Number of Texts Sent
Monthly Cell Phone
Contract Fee
Your monthly contract fee for your cell phone is fixed
for the number of monthly minutes in your contract. The
monthly contract fee does not change based on the
number of calls you make.
Number of Minutes Used
Within Monthly Plan
Monthly Cell Phone
Contract Fee
Within the monthly contract allotment, the average fixed cost
per cell phone call made decreases as more calls are made.
Number of Minutes Used
Within Monthly Plan
Behavior of Cost (within the relevant range)
Cost
In Total
Per Unit
Variable
Total variable cost changes
as activity level changes.
Variable cost per unit remains
the same over wide ranges
of activity.
Fixed
Total fixed cost remains
the same even when the
activity level changes.
Average fixed cost per unit goes
down as activity level goes up.
Cost
Total cost remains
constant within a
narrow range of
activity.
Activity
Cost
Total cost increases to a
new higher cost for the
next higher range of
activity.
Activity
Example: Office space
is available at a rental
rate of $30,000 per year
in increments of 1,000
square feet. As the
business grows more
space is rented,
increasing the total cost.
Continue
Rent Cost in Thousands
of Dollars
Total cost doesn’t change for a wide range of
activity, and then jumps to a new higher cost for
the next higher range of activity.
90
60
30
0
1,000
2,000
3,000
Rented Area (Square Feet)
Total Utility Cost
Slope is
variable cost
per unit
of activity.
Variable
Utility Charge
Fixed Monthly
Utility Charge
Activity (Kilowatt Hours)
1.
Engineered Cost
Bears a definitive physical relationship to the
activity measure (eg: material cost)
2.
Committed Cost
Results from an organization ownership or use
facilities (eg: rental, income tax)
3.
Discretionary Cost
Result of a management decision to spend a
particular amount of money for some purpose,
which can be changed in the short run (eg:
1.
Controllable Cost
A cost that a manager can control or heavily
influence the level of cost (eg: cost of food used
in restaurant)
2.
Uncontrollable Cost
A cost a manager has no control or influence
over (eg: advertising cost allocated by HQ)
Activity 3
Let’s have a quick discussion on
Cost Behavior of different
organization
How do we estimate cost?
5.
Cost Estimation
AccountClassification
Visual-Fit
Method
TABLE
High-Low
Method
Least Square
Regression GRAPH
Method
Multiple
Regression
Method
Engineering
Method
What is the use of Cost Estimation?
Cost Estimation
1.Account Classification :
• Classifies ledger accounts to either
a.Fixed cost
b.Variable cost
c.Semi-variable cost
Cost Estimation
2. Visual-Fit Method
• Suitable for semi-variable cost
a.Plot observation
b.Scatter diagram
c.Intercept = FC
d.VC = Semi-Variable Cost (-) FC
Cost Estimation
3. High-Low Method
• Use for semi-variable cost
approximation
a.Variable Cost Per unit
= (HIGHEST COST - LOWEST COST ) /
(HIGHEST ACTIVITY - LOWEST ACTIVITY
Cost Estimation
4. Least Square Regression Method
a.Y = a + b1X1
Cost Estimation
5. Multiple Regression Method
a.Y = a + b1X1+ b2X2
Cost Estimation
6. Engineering Method
a.How much needed and how much
it cost
b.Not relying so much on historical
data
easy to use for simple
organization
more complex to explain
without in depth experience
on the expenditure
may get varied analysis due
to dependencies of
professional judgement
forward looking
comprehensive information
of activities involved and cost
involved
lack of objectivity : eg: two
cost analyst may give to
different report
Time Consuming and
expensive
easy to use for simple
organization
more complex to explain
without in depth
experience on the
expenditure
may get varied analysis
due to dependencies of
professional judgement
Easy to explain
with sufficient
knowledge, analyst is
able to spot outliers
lack of objectivity : eg:
two cost analyst may
give to different report
easy to use for simple
organization
Easy to explain
with sufficient
knowledge, analyst is
able to spot outliers
only uses high and low
points of data
lack of objectivity
lack of objectivity : eg:
two cost analyst may
give to different report
Easy to explain
with sufficient knowledge,
analyst is able to spot outliers
Make use of all available data
objective outcome
Easy to explain
with sufficient
knowledge, analyst is
able to spot outliers
Make use of all available
data
economic plausibility
Goodness of fit (R2)
lack of objectivity : eg:
two cost analyst may
give to different report
Easy to explain
Easy to explain
with sufficient knowledge,
analyst is able to spot outliers
with sufficient knowledge,
analyst is able to spot outliers
Make use of all available data
Make use of all available data
objective outcome
objective outcome
economic plausibility
more complex and requires
more statistical capabilities
Goodness of fit (R2)
economic plausibility
Goodness of fit (R2)
Cost Estimation can be used in all
stages of managerial accounting:
1.
2.
3.
4.
Plan
Decision Making
Directing Operation
Control
Cost Estimation also helps to
ascertain the behavior of cost
so that an estimation of cost
can or can’t be allocated
Scenario:
Donuts bakery need to identify
the behavior of Utilities cost
using cost estimation
techniques
Cost
Behavior
Cost
Estimation
•Identify relevant cost behaviors to your organization
•Identify the cost/ expense to be analyzed
•Identify relevant cost estimation methods
•Ascertain whether the cost is FC, VC, Semi-Variable, Step FC, Step VC
•Cost estimated
•Fixed -> cost can’t 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
Use the Cost
•Semi-Variable -> cost consists of both fixed and variable, hence a portion can’t be
Estimated
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 Methods : Account-Classification OR
Visual-Fit Method OR High-Low Method OR Least
Cost
Square Regression Method OR Engineering Method
Estimation
• Cost estimated
• Using Method above: (1) Utilities is found to be SemiUse of Cost
Variable Cost, and (2) Utilities FC = $1,500 VC =
Estimated
$0.05/unit
Activity 4
Team Name:
Team
Cost Estimation
Member
1
Accounting Analysis
2
Engineering Method
3
High Low Method
Visual Fit Method
5
Least Square Regression Method
Team Member Name
Let’s get busy!
6.
Absorption
Costing
ABC
Target
Costing
Life Cycle
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
Target Cost = Target Price (-) Target Profit
There are 7 key principles to target Cost:
1.Price led costing
2.Focus on customer
3.Focus on product design
4.Focus on process design
5.Cross functional teams
6.Life cycle costs
7.Value chain orientation
Which Approach should Target cost take on?
Traditional costing?
ABC?
Engineering costing?
ABSORPTION VS. VARIABLE COSTING
Absorption Costing
Sales
- Cost of good sold
Beginning inventory
+ Cost of good
manufactured
Goods available for
sale
- Ending inventory
Gross margin
- Selling &
administrative
expenses
Net operating income
Variable costing
Sales
- Variable costs
Variable Costs of good sold
Beginning inventory
+ Cost of good
manufactured
Goods available for sale
- Ending inventory
Selling & administrative
Contribution margin
- Fixed costs
Manufacturing overhead
Selling & administrative
Net operating income