Ringkasan AB PDF
Ringkasan AB PDF
Ringkasan AB PDF
AKUNTANSI BIAYA
CHAPTER 1 Management Accounting and Value
Value Chain is the sequence of business functions in which
The Accountant’s Role in the Organization customer usefulness is added to products or services .The
Value-Chain consists of:
1.Research & Development
Accounting Discipline Overview 2.Design
Managerial Accounting –measures, analyzes and reports 3.Production
financial and nonfinancial information to help managers 4.Marketing
make decisions to fulfill organizational goals. Managerial 5.Distribution
accounting need not be GAAP compliant. 6.Customer Service
Financial Accounting –focus on reporting to external users Key Success Factors
including investors, creditors, and governmental agencies. The dimensions of performance that customers expect, and
Financial statements must be based on GAAP. that are key to the success of a company include:
–Cost and efficiency
Major Differences Between Financial & Managerial –Quality
Accounting –Time
–Innovation
Planning & Control Systems
Planning selects goals, predicts results, decides how to
attain goals, and communicates this to the organization
–Budget –the most important planning tool
Control takes actions that implement the planning decision,
decides how to evaluate performance, and provides
feedback to the organization
A Five-Step Decision Making Process in Planning & Control
1.Identify the problem and uncertainties
2.Obtain information
3.Make predictions about the future
4.Make decisions by choosing between alternatives
5.Implement the decision, evaluate performance, and learn
Management Accounting Guidelines
Strategy & Management Accounting Cost –Benefit approach is commonly used: benefits
Strategy –specifies how an organization matches its own generally must exceed costs as a basic decision rule
capabilities with the opportunities in the marketplace to
accomplish its objectives Behavioral & Technical Considerations –people are involved
in decisions, not just dollars and cents .Different definitions
Strategic Cost Management –focuses specifically on the cost of cost may be used for different applications
dimension within a firm’s overall strategy
Professional Ethics
Management accounting helps answer important questions The four standards of ethical conduct for management
such as: accountants as advanced by the Institute of Management
–Who are our most important customers, and how do we Accountants:
deliver value to them? –Competence
–What substitute products exist in the marketplace, and –Confidentiality
how do they differ from our own? –Integrity
–What is our critical capability? –Objectivity
–Will we have enough cash to support our strategy or will
we need to seek additional sources? EXERCISE
Campbell Soup Company incurs the following costs:
Creating value is an important part of planning and a. Purchase of tomatoes by a canning plant for Campbell’s
implementing strategy .Value is the usefulness a customer tomato soup products
gains from a company’s product or service.
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b. Materials purchased for redesigning Pepperidge Farm Direct costs –can be conveniently and economically traced
biscuit containers to make biscuits (tracked) to a cost object
stay fresh longer Indirect costs –cannot be conveniently or economically
c. Payment to Backer, Spielvogel, & Bates, the advertising traced (tracked) to a cost object. Instead of being traced,
agency, for advertising work on Healthy Request line of these costs are allocated to a cost object in a rational and
soup products systematic manner
d. Salaries of food technologists researching feasibility of a
Prego pizza sauce that has minimal calories BMW: Assigning Costs to a Cost Object
e. Payment to Safeway for redeeming coupons on
Campbell’s food products
f. Cost of a toll-free telephone line used for customer
inquiries about using Campbell’s soup products
g. Cost of gloves used by line operators on the Swanson
Fiesta breakfast-food production line
h. Cost of handheld computers used by Pepperidge Farm
delivery staff serving major supermarket accounts
Required Classify each cost item as one of the business
functions in the value chain !
Solution
a. Production
b. Design of products and processes
c. Marketing
d. Research and development
e. Marketing
f. Customer service Cost Examples
g. Production Direct Costs
h. Distribution –Parts
–Assembly line wages
CHAPTER 2
Indirect Costs
An Introduction to Cost Terms and Purposes –Electricity
–Rent
–Property taxes
Basic Cost Terminology
Cost –sacrificed resource to achieve a specific objective Factors Affecting Direct / Indirect Cost Classification
Actual cost –a cost that has occurred Cost Materiality
Budgeted cost –a predicted cost Availability of information-gathering technology
Cost object –anything of interest for which a cost is desired Operational Design
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CHAPTER 3
Determining How Cost Behave
Cost Functions
A cost function is a mathematical representation of how a
cost changes with changes in the level of an activity relating
to that cost
Cost Terminology
Variable Costs –costs that change in total in relation to
some chosen activity or output
Fixed Costs –costs that do not change in total in relation to
some chosen activity or output
Mixed Costs –costs that have both fixed and variable Criteria for Classifying Variable & Fixed Components of a
components; also called semivariable costs Cost
1.Choice of Cost Object –different objects may result in
Cost Function Assumptions different classification of the same cost
1.Variations in the level of a single activity (the cost driver) 2.Time Horizon –the longer the period, the more likely the
explain the variations in the related total costs cost will be variable
2.Cost behavior is approximated by a linear cost function 3.Relevant Range –behavior is predictable only within this
within the relevant range .Graphically, the total cost versus band of activity
the level of a single activity related to that cost is a straight
line within the relevant rage The Relevant Range Illustrated
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Conference Method
Estimates cost functions on the basis of analysis and
opinions about costs and their drivers gathered from
various departments of a company
Pools expert knowledge
Reliance on opinions still make this method subjective
Account Analysis Method 2.Calculate Total Fixed Costs
Estimates cost functions by classifying various cost accounts
as variable, fixed or mixed with respect to the identified
level of activity
Is reasonably accurate, cost-effective, and easy to use, but
is subjective
Qualitative Analysis
Uses a formal mathematical method to fit cost functions to 3.Summarize by writing a linear equation
past data observations . Advantage: results are objective
Steps in Estimating a Cost Function Using Quantitative
Analysis
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Terminology
Goodness of Fit –indicates the strength of the relationship
between the cost driver and costs
Residual Term –measures the distance between actual cost
and estimated cost for each observation
Regression Analysis
Regression analysis is a statistical method that measures the Criteria for Evaluating Alternative Cost Drivers
average amount of change in the dependent variable 1.Economic Plausibility
associated with a unit change in one or more independent 2.Goodness of Fit
variables 3.Significance of the Independent Variable
Is more accurate than the High-Low method because the
regression equation estimates costs using information from Nonlinear Cost Functions
allobservations; the High-Low method uses only 1.Economies of Scale
twoobservations 2.Quantity Discounts
3.Step Cost Functions –resources increase in “lot-sizes”, not
Types of Regression individual units
Simple –estimates the relationship between the dependent 4.Learning Curves –labor hours consumed decrease as
variable and oneindependent variable workers learn their jobs and become better at them
Multiple –estimates the relationship between the 5.Experience Curve –broader application of learning curve
dependent variable and two or moreindependent variables that includes Downstream activities including marketing
and distribution
Sample Regression Model Plot
Nonlinear Cost Functions Illustrated
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Time Learning Model Comparative Plots Extreme values of observations occur from errors in
recording costs
There is no homogeneous relationship between the cost
driver and the individual cost items in the dependent
variable-cost pool. A homogeneous relationship exists when
each activity whose costs are included in the dependent
variable has the same cost driver
Data Problems
The relationship between the cost driver and the cost is not
stationary
Inflation has affected costs, the driver, or both
EXERCISE :
The Helicopter Division of GLD, Inc., is examining
helicopter assembly costs at itsIndiana plant. It has
received an initial order for eight of its new land-surveying
helicopters.GLD can adopt one of two methods of
assembling the helicopters:
Required
1. How many direct-assembly labor-hours are required to
assemble the first eight helicoptersUnder
The Ideal Database (a) the labor-intensive method and (b) the machine-
1.The database should contain numerous reliably measured intensive method?
observations of the cost driver and the costs 2. What is the total cost of assembling the first eight
2.In relation to the cost driver, the database should helicopters under
consider many values spanning a wide range (a) the laborintensive
method
Data Problems (b) the machine-intensive method?
The time period for measuring the dependent variable does
not match the period for measuring the cost driver Solution
Fixed costs are allocated as if they are variable 1. a. The following calculations show the labor-intensive
Data are either not available for all observations or are not assembly method based on an85% cumulative average-
uniformly reliable time learning model (using Excel):
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CHAPTER 4
Job Costing
Cumulative average-time per unit for the Xth unit in
column H is calculated as y =aXb;. For example, when X =
3, y = 2,000 3–0.234465 =1,546 labor-hours. Basic Costing Terminology
Several key points from prior chapters:
b. The following calculations show the machine-intensive –Cost Objects -including responsibility centers,
assembly method based ona 90% incremental unit-time departments, customers, products, etc.
learning model: –Direct costs and tracing –materials and labor
–Indirect costs and allocation -overhead
…logically extended
Cost Pool –any logical grouping of related cost objects
Cost-allocation base –a cost driver is used as a basis upon
which to build a systematic method of distributing indirect
costs.
For example, let’s say that direct labor hours cause indirect
costs to change. Accordingly, direct labor hours will be used
to distribute or allocate costs among objects based on their
usage of that cost driver
Costing Systems
Job-Costing: system accounting for distinct cost objects
called Jobs. Each job may be different from the next, and
consumes different resources
–Wedding announcements, aircraft, advertising
Process-Costing: system accounting for mass production of
identical or similar products
Individual unit time for the Xth unit in column H is –Oil refining, orange juice, soda pop
calculated as y = aXb; . For example, when X = 3, y = 800 3–
0.152004 = 677 labor-hours. Costing Approaches
Actual Costing -allocates:
2. Total costs of assembling the first eight helicopters are –Indirect costs based on the actualindirect-cost rates times
as follows: the actual activity consumption
The machine-intensive method’s assembly costs are Normal Costing –allocates:
$66,342 lower than the laborintensivemethod ($892,692 – –Indirect costs based on the budgetedindirect-cost rates
$826,350). times the actual activity consumption
Both methods allocate Direct costs to a cost object the
same way: by using actual direct-cost rates times actual
consumption
Costing Systems Illustrated
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Sample Job Cost Source Documents closely reflect the actual state of the business, its
inventories and its production processes.
All Product Costs are accumulated in the Work-in-Process
Control Account
–Direct Materials used
–Direct Labor incurred
–Factory Overhead allocated or applied
ActualIndirect Costs (overhead) are accumulated in the
Manufacturing Overhead Control account
Journal Entries, continued
Purchase of Materials on credit:
Materials Control XXX
Accounts Payable Control XXX
Requisition of Direct and Indirect Materials (OH) into
production:
Work-in-Process Control XXX
Manufacturing Overhead Control YYY
Materials Control ZZZ
Incurred Direct and Indirect (OH) Labor Wages
Work-in-Process Control XXX
Manufacturing Overhead Control YYY
Cash Control ZZZ
Incurring or recording of various actualIndirect Costs:
Job CostingOverview
Manufacturing Overhead Control XXX
Salaries Payable Control AAA
Accounts Payable Control BBB
Accumulated Depreciation Control CCC
Prepaid Expenses Control DDD
Allocation or application of Indirect Costs (overhead) to the
Work-in-Process account is based on a predetermined
overhead rate.
Work-in-Process Control XXX
Manufacturing Overhead Allocated XXX
Note: actual overhead costs are neverposted directly into
Work-in-Process
Products are completed and transferred out of production
in preparation for being sold
Finished Goods Control XXX
Work-in-Process Control XXX
Products are sold to customers on credit
Accounts Receivable Control XXX
Sales XXX
And the associated costs are transferred to an expense
(cost) account
Cost of Goods Sold YYY
Journal Entries Finished Goods Control YYY
Journal entries are made at each step of the production
process .The purpose is to have the accounting system
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Note: The difference between the sales and cost of goods This difference will be eliminated in the end-of-period
sold amounts represents the gross margin (profit) on this adjusting entry process, using one of three possible
particular transaction methods
Flow of Costs Illustrated The choice of method should be based on such issues as
materiality, consistency and industry practice
Three Methods for Adjusting Over/Underapplied
Overhead
Adjusted Allocation Rate Approach –all allocations are
recalculated with the actual, exact allocation rate.
Proration Approach –the difference is allocated between
Cost of Goods Sold, Work-in-Process, and Finished Goods
based on their relative sizes
Write-Off Approach –the difference is simply written off to
Cost of Goods Sold
Illustrated Subsidiary Ledger in a Job Cost Environment
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Steps 3, 4 & 5 Illustrated –Abnormal spoilage costs are not included as a part of the
cost of good units produced
Job Costing and Rework
Three types of rework:
1.Normal rework attributable to a specific job –the rework
costs are charged to that job
2.Normal rework common to all jobs –the costs are charged
to manufacturing overhead and spread, through overhead
allocation, over all jobs
3.Abnormal rework –is charged to the Loss from Abnormal
Rework account that appears on the income statement
Accounting for Scrap
No distinction is made between normal and abnormal scrap
because no cost is assigned to scrap
The only distinction made is between scrap attributable to a
specific job and scrap common to all jobs
Aspects of Accounting for Scrap
1.Planning & Control, including physical tracking
2.Inventory costing, including when and how it affects
operating income
NOTE: Many firms maintain a distinctaccount for scrap costs
Scrap Attributable to a Specific Job–job costing systems
sometime trace the scrap revenues to the jobs that yielded
the scrap.
–Done only when the tracing can be done in an economic
feasible way
–No cost assigned to scrap
Scrap Common to all Jobs–all products bear production
costs without any credit for scrap revenues except in an
indirect manner
–Expected scrap revenues are considered when setting is
lower than it would be if the overhead budget had not been
reduced by expected scrap revenues
Recognizing Scrap at the Time of its Production–sometimes
the value of the scrap is material, and the time between
storing and selling it can be long
The firm assigns an inventory cost to scrap at a conservative
Job Costing and Spoilage estimate of its net realizable valueso that production costs
Job costing systems generally distinguish between normal and related scrap revenues are recognized in the same
spoilage attributable to a specific job from normal spoilage accounting period
common to all jobs
EXERCISE :
Job Costing and Accounting for Spoilage
Normal Spoilage Attributable to a Specific Job: When Burlington Textiles has some spoiled goods that had an
normal spoilage occurs because of the specifications of a assigned cost of $40,000 and zeronet disposal value.
particular job, that job bears the cost of the spoilage minus
the disposal value of the spoilage Required :
Prepare a journal entry for each of the following
Normal Spoilage Common to all Jobs: IN some cases, conditions under (a) process costing
spoilage may be considered a normal characteristic of the (department A) and (b) job costing:
production process. 1. Abnormal spoilage of $40,000
–The spoilage is costed as manufacturing overhead because 2. Normal spoilage of $40,000 regarded as common to all
it is common to all jobs operations
–The Budgeted Manufacturing Overhead Rate includes a 3. Normal spoilage of $40,000 regarded as attributable to
provision for normal spoilage specifications of a particular job
Abnormal Spoilage: If the spoilage is abnormal, the net loss
is charged to the Loss From Abnormal Spoilage account Solution
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CHAPTER 16
Cost Allocation : Join Prducts and Byproducts
Joint Cost Terminology
Joint Costs –costs of a single production process that yields
multiple products simultaneously.
Splitoff Point –the place in a joint production process where
two or more products become separately identifiable
Separable Costs –all costs incurred beyond the splitoff point
that are assignable to each of the now-identifiable specific
products Reasons for Allocating Joint Costs
Required for GAAP and taxation purposes
Joint Cost Terminology Cost values may be used for evaluation purposes
Categories of Joint Process Outputs: Cost-based Contracting
1.Outputs with a positive sales value Insurance Settlements
2.Outputs with a zero sales value Required by regulators
Litigation
Product –any output with a positive sales value, or an
output that enables a firm to avoid incurring costs Joint Cost Allocation Methods
–Value can be high or low Market-Based –allocate using market-derived data (dollars):
1.Sales value at splitoff
Main Product –output of a joint production process that 2.Net Realizable Value (NRV)
yields one product with a high sales value compared to the 3.Constant Gross-Margin percentage NRV
sales values of the other outputs
Physical Measures –allocate using tangible attributes of the
Joint Products –outputs of a joint production process that products, such as pounds, gallons, barrels, etc
yields two or more products with a high sales value
compared to the sales values of any other outputs
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Net Realizable Value Method Illustrated Sales Method –recognizes no byproduct inventory, and
recognizes only sales at the time of sales: byproduct costs
are not tracked separately
Constant Gross Margin NRV Illustrated
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EXERCISE :
Inorganic Chemicals (IC) processes salt into various
industrial products. In July 2012, ICincurred joint costs of
$100,000 to purchase salt and convert it into two
products: causticsoda and chlorine. Although there is an
active outside market for chlorine, IC processesall 800 tons
of chlorine it produces into 500 tons of PVC (polyvinyl
chloride), which isthen sold. There were no beginning or
ending inventories of salt, caustic soda, chlorine, orPVC in
July. Information for July 2012 production and sales
follows:
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3. Under the three allocation methods in requirements 1 2. Net realizable value (NRV) method
and 2, what is the gross-marginpercentage of (a) caustic
soda and (b) PVC?
4. Lifetime Swimming Pool Products offers to purchase 800
tons of chlorine in August2012 at $75 per ton. Assume all
other production and sales data are the same forAugust as
they were for July. This sale of chlorine to Lifetime would
mean that noPVC would be produced by IC in August. How
would accepting this offer affect IC’sAugust 2012 operating 3a. Gross-margin percentage of caustic soda
income?
Solution
The following picture provides a visual illustration of the
main facts in this problem.
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–Safety stock is a buffer against unexpected increases in Relevant Incremental Costs –those costs of the purchasing
demand, uncertainty about lead time, and unavailability of firm that change with the quantity of inventory held
stock from suppliers
Opportunity Costs
Safety Stock Computation Illustration Relevant Opportunity Cost of Capital –the return foregone
by investing capital in inventory rather than elsewhere. This
cost equals the required rate of return multiplied by the
unit costs that vary with the number of units purchased and
are incurred at the time the units are received
Cost of a Prediction Error
Three steps in determining the cost of a prediction error:
1.Compute the monetary outcome from the best action
that could be taken, given the actual amountof the cost per
purchase order
2.Compute the monetary outcome from the best action
based on the incorrect amountof the predictedcost per
purchase order
3.Compute the difference between Steps 1 & 2
Just-in-Time Purchasing
Just-in-Time (JIT) Purchasing is the purchase of materials or
goods so they are delivered just as needed for production or
sales
JIT is popular because carrying costs are actually much
greater than estimated because warehousing, handing,
shrinkage and investment costs have not been correctly
estimated
JIT reduces the cost of placing a purchase order because:
–Long-term purchasing agreements define price and quality
terms. Individual purchase orders covered by those
agreements require no additional negotiation regarding
price or quality
–Companies are using electronic links to place purchase
orders at a small fraction of traditional methods (phone or
mail)
–Companies are using purchase-order cards
Relevant Costs in JIT Purchasing
Purchasing Costs
Stockout Costs
Quality Costs
Relationship Between Carrying & Ordering Costs
Illustrated
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Inventory Management and Materials Requirements ERP can be expensive, large, and unwieldy
Planning
Materials Requirements Planning (MRP) –a “push-through” Performance Measures and Control in JIT
system that manufactures finished goods for inventory on Financial performance measures such as inventory turnover
the basis of demand forecasts ratio
Nonfinancial performance measures of time, inventory, and
MRP Information Inputs quality such as:
MRP uses three information sources to determine the –Manufacturing lead times
necessary outputs at each stage of production –Units produced per hour
1.Demand forecasts of final products –Days of inventory on hand
2.A bill of materials detailing the materials, components, –Setup time as a % of total manufacturing time
and subassemblies for each final product –Number of defective units as a % of total units produced
3.The quantities of materials, components, and product
inventories to determine the necessary outputs at each Backflush Costing
stage of production Backflush Costing omits recording some or all of the journal
entries relating to the stages from the purchase of direct
MRP materials to the sale of finished goods
Takes into account lead time to purchase materials and to –Since some stages are omitted, the journal entries for a
manufacture components and finished products subsequent stage use normal or standard costs to work
Sets a master production schedule specifying quantities and backward to “flush out” the costs in the cycle for which
timing of each item to be produced journal entries were not made
The output of each department is pushed through the
production line whether it is needed or not Contrasts to traditional normal and standard costing
“Push Through” may result in an accumulation of inventory systems using sequential tracking: recording journal entries
at each trigger point in the production process
Inventory Management and JIT Production
JIT (Lean) Production –is a “demand-pull” manufacturing Special Considerations in Backflush Costing
system that manufactures each component in a production Backflush costing does not necessarily comply with GAAP
line as soon as and only when needed by the next step in –However, inventory levels may be immaterial, negating the
the production line necessity for compliance
Demand triggers each step of the production process,
starting with customer demand for a finished product and Backflush costing does not leave a good audit trail –the
working backward ability of the accounting system to pinpoint the uses of
Demand pulls an order through the production line resources at each step of the production process
Sample Journal Entries in Backflush Costing
JIT Production Goals
1.Meet customer demand in a timely basis, SampleGeneral LedgerFlows inBackflushCosting
2.with high-quality products,
3.at the lowest possible cost.
JIT Production Features
Production is organized in manufacturing cells, a grouping
of all the different types of equipment used to make a given
product
Workers are hired and trained to be multi-skilled (cross-
trained)
Defects are aggressively eliminated
Setup time is reduced
Suppliers are selected on the basis of their ability to deliver
quality materials in a timely manner
Other Benefits of JIT Production
Lower overhead costs
Lower inventory levels
Heightened emphasis on improving quality by eliminating
the specific causes of rework, scrap, and waste
Lower manufacturing lead times
JIT and Enterprise Resource Planning Systems (ERP)
JIT success hinges on the speed of information flows from
customers to manufacturers to suppliers
ERP is a system with a single database that collects data and
feeds it into software applications supporting all of a firm’s
business activities
ERP gives managers, workers, customers and suppliers
access to operating information
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Problem 2
Littlefield Company uses a backflush costing system with
three trigger points:
Purchase of direct materials
Completion of good finished units of product
Sale of finished goods
There are no beginning inventories. Information for April
2011 is as follows:
Direct materials purchased $880,000
Conversion costs allocated $ 400,000
Direct materials used $850,000
Costs transferred to finished goods $1,250,000
Conversion costs incurred $422,000
Cost of goods sold $1,190,000
1. Prepare journal entries for April (without disposing of
underallocated or overallo- Required
cated conversion costs). Assume there are no direct
materials variances.
2. Under an ideal JIT production system, how would the
amounts in your journal
entries differ from the journal entries in requirement 1?
Solution
1. Journal entries for April are as follows:
Lean Accounting
Lean Accounting is a costing method that supports creating
value for the customer by costing the entire value stream,
not individual products or departments, thereby eliminating
waste in the accounting process
EXERCISE
Problem 1
Lee Company has a Singapore plant that manufactures
MP3 players. One component isan XT chip. Expected 2. Under an ideal JIT production system, if the
demand is for 5,200 of these chips in March 2011. Lee manufacturing lead time per unit is very short, there would
estimatesthe ordering cost per purchase order to be $250. be zero inventories at the end of each day. Entry (C1) would
The monthly carrying cost for one unitof XT in stock is $5. be $1,190,000 finished goods production [to match finished
Required goods sold in entry (D1)], not $1,250,000. If the marketing
1. Compute the EOQ for the XT chip. department could only sell goods costing $1,190,000, the
2. Compute the number of deliveries of XT in March 2011. JIT production system would call for direct materials
Solution purchases and conversion costs of lower than $880,000 and
$422,000, respectively, in entries (A1) and (A2).
CHAPTER 14
Cost Allocation, Customer Profitability Analysis,
And Sales-Variance Analysis
Cost Allocation
Assigning indirect costs to cost objects
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These costs are not traced –Cost allocation here is viewed as a “reasonable” or “fair”
Indirect costs often comprise a large percentage of Total means of establishing selling price
Overall Costs
Ability to Bear –cost are allocated in proportion to the cost
Purposes of Cost Allocation object’s ability to bear them
–Generally, larger or more profitable objects receive
proportionally more of the allocated costs
Cost Allocation Illustrated
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Sales-Quantity Variance
Sales Variances
Level 1: Static-budget variance –the difference between an
actual result and the static-budgeted amount
Level 2: Flexible-budget variance –the difference between
an actual result and the flexible-budgeted amount
Level 2: Sales-volume variance
Level 3: Sales Quantity variance
Level 4: Sales Mix variance
Sales-Mix Variance
Measures shifts between selling more or less of higher or
lower profitable products
Market-Share Variance
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Sales-Mix and –Quantity Variances Illustrated Market-Share and –Size Variances Illustrated
Market-Size Variance
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Sales Variances Summarized In late 2011, a marketing research firm estimated industry
volume for commercial andresidential vinyl flooring for
2012 at 800,000 rolls. Actual industry volume for 2012 was
700,000 rolls.
1. Compute the sales-mix variance and the sales-quantity
variance by type of vinyl Requiredflooring and in total.
(Compute all variances in terms of contribution margins.)
2. Compute the market-share variance and the market-size
variance
3. What insights do the variances calculated in
requirements 1 and 2 provide aboutPayne Company’s
performance in 2012?
Solution
1. Actual sales-mix percentage:
EXERCISE
The Payne Company manufactures two types of vinyl
flooring. Budgeted and actual operating data for 2012 are
as follows:
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Note that the algebraic sum of the market-share variance Comparative Allocation Bases Illustrated
and the market-size varianceis equal to the sales-quantity
variance: $5,950,000 F + $4,250,000 U = $1,700,000 F.
3. Both the total sales-mix variance and the total sales-
quantity variance are favorable. Thefavorable sales-mix
variance occurred because the actual mix comprised more
of thehigher-margin commercial vinyl flooring. The
favorable total sales-quantity varianceoccurred because the
actual total quantity of rolls sold exceeded the budgeted
amount.The company’s large favorable market-share
variance is due to a 12% actualmarket share compared with
a 10% budgeted market share. The market-size varianceis
unfavorable because the actual market size was 100,000
rolls less than the budgetedmarket size. Payne’s
performance in 2012 appears to be very good.
Althoughoverall market size declined, the company sold
more units than budgeted and gainedmarket share.
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Step-Down Method
Methods of Allocating Support Costs to Production Data Used in Cost Allocation Illustrations
Departments
1.Direct
2.Step-Down
3.Reciprocal
Direct Method
Allocates support costs only to Operating Departments
No Interaction between Support Departments prior to
allocation
Direct Method
Step-Down Method
Allocates support costs to other support departments and
to operating departments that partially recognizes the
mutual services provided among all support departments
One-Way Interaction between Support Departments prior
to allocation
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CHAPTER 5
ACTIVITY BASED COSTING
Background
Recall that Factory Overhead is applied to production in a
rational systematic manner, using some type of averaging.
There are a variety of methods to accomplish this goal.
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These methods often involve tradeoffs between simplicity Plastim and ABC Illustrated
and realism
Broad Averaging
Historically, firms produced a limited variety of goods while
their indirect costs were relatively small.
Allocating overhead costs was simple: use broad averages
to allocate costs uniformly regardless of how they are
actually incurred
–Peanut-butter Costing
The end-result: overcosting & undercosting
Over & Undercosting
Overcosting –a product consumes a low level of resources
but is allocated high costs per unit
Undercosting –a product consumes a high level of resources
but is allocated low costs per unit
Cross-subsidization
The results of overcosting one product and undercosting
another.
The overcosted product absorbs too much cost, making it
seem less profitable than it really is
The undercosted product is left with too little cost, making
it seem more profitable than it really is
Plastim & Simple Costing
Conclusions
Each method is mathematically correct
Each method is acceptable
Each method yields a different cost figure, which will lead to
different Gross Margin calculations
Only Overhead is involved. Total Costs for the entire firm
remain the same –they are just allocated to different cost
objects within the firm
Selection of the appropriate method and drivers should be
based on experience, industry practices, as well as a cost-
benefit analysis of each option under consideration
A Cautionary Tale
A number of critical decisions can be made using this
information;
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–Should one product be “pushed” over another? Plastim and ABC Product Costs
Accounting for overhead costs is an imprecise science.
Accordingly, best efforts should be put forward to arrive at
a cost that is fair and reasonable.
Rationale for selecting a more refined costing system
Increase in product diversity
Increase in Indirect Costs
Advances in information technology
Competition in foreign markets
Plastim and ABC Rate Calculation
Cost Hierarchies
ABC uses a four-level cost structure to determine how far
down the production cycle costs should be pushed:
–Unit-level (output-level)–Batch-level
–Product-sustaining-level–Facility-sustaining-level
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Question 1 (10%)
Adi Nugraha was recently hired as assistant controller of PT
Godong Ijo, which processes chemicals for use in fertilizers.
Adi was selected for this position because of his past
experience in the chemical processing field. During his first
month on the job, Adi made a point of getting to know the
people responsible for the plant operations and learning
how things are done at PT Godong Ijo.
During a conversation with the plant supervisor, Adi asked
Soft drinks have fewer deliveries and require less shelf- about the company procedures for handling toxic waste
stocking time and customer supportthan either fresh materials. The plant supervisor replied that he was not
produce or packaged food. Most major soft-drink suppliers involved with the disposal of wastes and suggested that Adi
deliver merchandiseto the store shelves and stock the might be wise to ignore this issue. This response
shelves themselves. In contrast, the fresh produce areahas strengthened Adi’s determination to probe this area further
the most deliveries and consumes a large percentage of to be sure that the company was not vulnerable to
shelf-stocking time. It also has thehighest number of litigation.
individual sales items and so requires the most customer
support. The simplecosting system assumed that each Upon further investigation, Adi discovered evidence that PT
product line used the resources in each activity area inthe Godong Ijo was using a nearby residential landfill to dump
same ratio as their respective individual cost of goods sold toxic wastes. It appeared that some members of PT Godong
to total cost of goods sold. Ijo’s management team were aware of this situation and
may have been involved in arranging for this dumping;
Clearly, this assumption is incorrect. Relative to cost of however, Adi was unable to determine whether his
goods sold, soft drinks and packagedfood use fewer superior, the controller, was involved.
resources while fresh produce uses more resources. As a
result, the ABC systemreduces the costs assigned to soft Uncertain how he should proceed, Adi began to consider his
drinks and packaged food and increases the costs assigned options by outlining the following three alternative courses
tofresh produce. The simple costing system is an example of of action.
averaging that is too broad.FS managers can use the ABC Seek the advice of his superior, the controller
information to guide decisions such as how to allocatea Anonymously release the information to the local
planned increase in floor space. An increase in the newspaper.
percentage of space allocated to softdrinks is warranted. Discuss the situation with an outside member of the
Note, however, that ABC information should be but one board of directors with whom he is acquainted
input intodecisions about shelf-space allocation. FS may
have minimum limits on the shelf spaceallocated to fresh Required:
produce because of shoppers’ expectations that a. Discuss why Adi has an ethical responsibility to take some
supermarkets will carryproducts from this product line. action in the matter of PT Godong Ijo and the dumping of
toxic wastes. Refer to the specific standards of IMA
In many situations, companies cannot make Statement of Ethical Professional Practice to support your
productdecisions in isolation but must consider the effect answer. ( 4 points )
that dropping or deemphasizing a productmight have on
customer demand for other products.Pricing decisions can b. For each of the three alternative courses of action that
also be made in a more informed way with ABC Adi has outlined, explain whether or not the action is
information.For example, suppose a competitor announces appropriate. Use the IMA Statement of Ethical Professional
a 5% reduction in soft-drink prices. Giventhe 10.78% margin Practice to support your answer ( 3 points )
FS currently earns on its soft-drink product line, it has
flexibility toreduce prices and still make a profit on this c. Without prejudice to your answer in Question (b), assume
product line. In contrast, the simple costingsystem that Adi sought the advice of his superior, the controller,
erroneously implied that soft drinks only had a 1.70% and discovered that the controller was involved in the
margin, leaving little roomto counter a competitor’s pricing dumping of toxic wastes. Using IMA Statement of Ethical
initiatives. Professional Practice to support your answer, describe the
steps that Adi should take to resolve this situation. ( 3
points )
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Required:
Using the above data, prepare a report that contrasts the
different amounts of personnel department cost that would
be allocated to each of the production departments if the
cost driver used is
a. Number of employees; (3 points)
b. The number of new hires. (3 points)
c. Which cost estimation method is being used by Mumbai
Company? (1point)
In addition, below is the value of the fan’s inventory for Question 4 (5%)
both work-in-progress and finished goods ( in Rp) at the a. What are the costs-benefits of using standard costing? (3
beginning and the end of September 2012 points)
b. What happen if standard costing differ with actual
costing? (2 points)
Question 5 (20%)
Anton Cahyadi is an advertising consultant. Recently, he has
Required : been working with his accountant to develop a formal
Kindly form a Cost of Goods Sold Report for September accounting system. His accountant has suggested the use of
2012 ( Notes : For materials used, you need to separate a job order costing system to simplify costing procedures.
direct material from indirect materials) During September, Anton and his staff working on jobs for
the following companies :
Question 3 (15%)
3A. Katty Poni opened a re-bonding salon in a new shopping
mall. She had anticipated that the costs for the re-bonding
service would be primarily fixed, but she found that the re-
bonding costs increased with the number of visits. Costs for
this service over the past 12 months are as follows :
Job for PT Burangrang and PT Red Sky has been completed
and recognized as revenue, but not for PT Tarantula.
Material purchased for the month is Rp 70.000.000. Anton
is able to trace direct material to each job because most of
the cost associated with material related to photography
and duplicating. The accountant has told Anton that a
reasonable charge for overhead, based on previous
information is Rp 165.000 per direct labor hour. The normal
labor cost per hour is Rp 135.000. The Actual overhead for
the month is Rp 120.000.000.
Required:
Based on the above information:
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Required:
1. Compute the equivalent units for each cost category in
assembly department and testing department.
2. Explain the degree of completion of Direct Material used
in calculation of equivalent units as in no. 1 above.
3. Calculate the ending balance of Work in Process for both ANSWER
departments as per 31 October 2012. Question 1
4. Prepare journal entries for all October 2012 transactions a. Adi has an ethical responsibility to take some action in
affecting Work in Process – Assembly and Work in Process – the matter of PT Godong Ijo and the dumping of toxic
Testing. because it involves some values according to IMA
5. Calculate the unit cost of the product (monitor for Statement of Ethical Professional Practice such as :
laptops).
Competence
Adi was selected as an assistant controller because of his
past experience in the chemical processing field which
means he has some competence in this subject.
Confidentially
The conversation between Adi and the plant supervisor
should be keep confidential.
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Integrity
It involves Adi’s integrity to perform duties ethically
especially when Adi was suggested to ignore this issue by
the plant supervisor.
Credibility
Adi and others PT Godong Ijo members must provide
credible evidence that some management team were
involved in arranging for the dumping.
b. Adi’s alternative courses of action analysis according to
IMA Statement of Ethical Professional Practice :
Seek he
t advice of his superior is appropriate except when
it appears that the superior is involved. In this case, Adi
action is not appropriate because Adi was unable to
determine whether his superior was involved.
Release information to newspapers is clearly an
inappropriate. Adi must keep the information confidential QUESTION 3
unless he can prove some credible evidences.
Discuss with outside member is inappropriate because Adi
must keep the information confidential. It is better for Adi
to discuss the issue with the next level supervisor, such as
the CEO.
c. The steps Adi should take :
Discuss the issue with the next level supervisor, for
example CEO and audit committee.
Clarify relevant ethical issues by initiating a confidential
discussion with an IMA ethics Counselor or other impartial
advisor.
Consult his own attorney as to legal obligations and tights
concerning the ethical conflict.
Question 2
PT Segar Abadi
Cost of Goods Sold Report
For the period ended September 31, 2012 ( in Rp )
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Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)
c. Mumbai Company should use the number of employees Labor hours PT Red Sky = 28.350.000/135.000 = 210 hours
as cost driver to estimate the cost because the number of Labor hours PT Tarantula = 60.750.000/135.000 = 450 hours
employees is more economic plausibility to the cost than Total labor hours = 700 hours
the number of new hires. MOH allocated = 700 x Rp 165.000 = Rp 115.500.000
Under allocated indirect cost = Rp 120.000.000 –
Question 4 115.500.000 = Rp 4.500.000
a. The cost benefit of standard costing system:
Helps managers toocus f on important issues Journal entries:
If costs remain standards, Managers can focus on other
issues. When costs fall significantly outside the standards,
managers are alerted that there may be problems requiring
attention.
Can promote economy and efficiency d. Anton income = 15 x 7.800.000 = Rp 117.000.000
Standard costing provide benchmarks that individuals can COGS PT Red Sky = 24.300.000 + 28.350.000 + 34.650.000 ->
use to judge their own performance. allocated (210x165000)
Can simplify bookkeeping = 52.650.000 + 36.272.727
Instead of recording actual costs for each job, the standard = Rp 88.922.727 87.300.000
costs for materials, labor, and overhead can be charged to COGS PT Burangrang = 25.500.000
jobs. Anton Net income = 117.000.000 – 87.300.000 –
Fit naturally inan integrated system of responsibility 25.500.000= Rp 4.200.000
accounting
The standards establish what cost should be, who should e. Anton should consider time used to produce ads in billing
responsible for them, and what actual costs are under his customer. Time consumed job should be more expensive
control. than others.
b. After all of the variances has been calculated, they need Question 6 , 1. Equivalent Unit
to be closed. If the total amount of variances is not material,
then, those variances can be closed to COGS account.
However, if those total variances are big, then the variances
should be divided proportionately to WIP inventory,
finished goods inventory, and COGS accounts. How to
report the variances in the balance sheet and income
statement is the same as if company makes the journal
using normal costing.
Question 5
a. Journal Entries for PT Burangrang
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Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)
.
QUESTION 1: PROCESS COSTING WITH SPOILAGE (20%)
The good management of spoilage, scrap and rework is very
important to be done in an era where companies are
required to always take care of the interests of business and
the environment. You are required to explain the things
that need to be done by a manager nowadays so that the
interests of business and the environment can be
maintained.
Explain :
a. What is the so-called a good management of scrap,
spoilage and rework ? (hint : you are required also to
explain the difference between normal and abnormal
spoilage management) ( 5 % ).
b. Conventional management accounting systems that exist
today do not easily provide information regarding the
calculation of the environmental cost so that the business
and environment can be maintained. Explain ( 5 % ).
c. What are the things that need to be modified in the
conventional management accounting systems that exist
today so that information regarding the calculation of
environmental costs can be harmonized with the calculation
of the cost of scrap , spoilage and rework so that the
information could be easily provided and available ( 5 % ) .
d. You are faced with production processes that result in
significant scrap value. Describe the things that need to be
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Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)
Required Required:
1. Determine the allocation of joint cost for the period. 1. What is the economic order quantity?
2. Compute the cost assigned to the finished goods 2. What is the reorder point?
inventories for XXL, YYL, and ZZL. 3. Assume that there is possibility of 0.2 that the demand
3. The company has an opportunity to sell YYL at the split during purchase-order lead time increase by 50 units. SA is
off point for $3.8 per gallon. Give your argument whether considering to maintain safety stock of 20 units or 50 units
the company should sell YYL at the split off point or to cover the increase in demand. If the stockout cost is $0.5
continue to process this product further. per unit, which level of safety stock that will cost SA lower?
QUESTION 3: SUPPORT DEPARTMENT COST ALLOCATION B. ABC Products manufactures microfilm cameras. For
(20%) October, there were no beginning inventories of direct
materials and no beginning or ending work in process.
Smallville provides tax and accounting services to small and Conversion costs is the only indirect manufacturing cost
medium size companies. Smallville has two support category currently used. The data of November 2013are as
departments – Administrative Services (AS) and Information follow:
System (IS), and two operating departments – Tax Services
(TS) and Accounting Services (AS). For the last quarter of
2013, Smallville cost records indicate the following:
Required:
Journalize entry(ies) that would occur if the only trigger
point is the production of finished units
C. Explain both qualitative and quantitative performance
measures that can be applied to a company that adopt Just-
in-Time!
QUESTION 5: ACTIVITY BASED COSTING (20%)
At Deutschland Electronics, product lines are charged for
call center support costs based on sales revenue. Last year's
summary of call center operations revealed the following:
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Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)
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Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)
B.
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Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012)
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