Transcript: Should Company “A” Accept or Reject the proposal Proposal Placed Presented by: "ARIBA" M.Usman Khan Imran Ahmad M.Ali M.Khalid Zaffar The Party Connection prepares complete party kits for various types of celebrations. It is currently operating at 75% of its capacity. It costs The Party Connection $4.50 to make a packet that it sells for $25.00. It currently makes and sells 84,000 packets per year. Explanation Via Example Company “B” places a Special Order 15,000 packets at a price of $20 per packet to be shipped overseas. Should the Party Connection accept this special order? Company “B” Need 15000 units Will Pay $20 per unit Party Connection Presentation On: Cost Accounting(One Time Only Special Orders) .Special Order Decision .Incremental Revenue .Incremental Cost .Relevant Cost .Relevant Revenue Party Connection
Transcript: Freedom Card Case Charging for customer services? Introduction Cost Accounting Case Study Content Customer Profitability Profiles However... Some customers are profitable, some are not. Recommendation: Bay Bank could develope a product hierarchy Basic (for low-volume cardholders; fees applied; customers B, D) Premier (for high-volume cardholders; fees waived; customers A, C) Introduction Customer Profitability Analysis Questions: Should the company charges the supportive activities Anylze a proposal - Discontinue the low volume credit-card holders Ethical Issue - Casino's proposal Consumer Profitability Analysis Discontinuation Customer Profitability Profiles Long-run customer profitability. Ability to learn from customer Increase in overall demand from having well-known Customers Revenue: Commission: 1.5% * + Interest Revenue: 9.0% * + Annual Fee Charging for customer services? Cost Incurred: Processing Cost: $0.5 per transaction Inquiries Cost: $5 once Credit Card Replacement: $120 per card Account Maintenance(Bank Stmts): $108 annually Ethical Issues Charging for customer services? Wong Wing Fai, Fai 1174743 Wang Meng, Alex 1180651 Ho Sai Lun, Edmond 1128811 Law Kwok Fai, Fai 1118335 Chan Ka Chun, Eric 1182398 A $1252 $1790 69.94% $1252 102.54% C $336 $740 45.41% $1588 130.06% D ($89) $129 -69.99% $1499 122.77% B ($278) $390 -71.28% $1221 100% Freedom Card: Credit Card Organized by Bay Bank Usage: Generally, card holder can use the card to purchase at the retail merchants Assumption 1: Customers will NOT react to the fees in any aspect at all, including The amount of annual purchases Customer Satisfaction Customer loyalty to Freedom Card etc. Conclusion: Charging for customer services is justified because this will recoup the costs of providing customer services lower the demand for inquiries/card replacement NOT affect the present and future revenue It is Profitable legal Fair It is not right Negative effect Destroy the image of company Deteriorate the issue of gambling Induce younger people to gamble Thank you! Assumption 2: Customers will react to the fees. For instance, Some customers will cancel their credit cards once the cards are lost or stolen inasmuch as the card replacement fee Customers will switch to other kinds of credit cards, which provide free customer sevices Conclusion: Highly sensitive to the fees-->waived Q & A Tucker’s 5-question profitable? legal? fair? right? sustainable or environmentally sound? Freedom Card Customer Customer-level Customer OI dividend Cumulative Cumulative-customer-level Code operating income Revenue by revenue Customer level ol over total customer-level Profit comes from: Commission: 2.0% from the payments made by the holders to retail merchants, 0.5% of total went bad in 2006 Interest Revenue: 9% on the annual outstanding balance on card holders Annual Fee: $50, Students and "lifetime promotion program" holders can be exempted
Transcript: Car and truck emissions - The most common source of water pollution is runoff from city streets, parking lots, marinas, construction sites, logging sites and roadway (Elsa Brenner, New York Times journalist) - 1.2 million underground fuel storage tanks have been closed and out of these 317 000 tanks had "confirmed leaks" - 1/4 of motor oil can contaminate 1 million gallons of fresh water - 13.4% of used motor oil is illegally dumped; 10.1% is landfilled The production process Conclusion by Diana Solis & Lorane Beau Introduction Environmental costs of automobiles Cost Accounting - Vehicle companies have been aware of the impact the industry is having on the environment (Ralph Nader, "Unsafe at Any speed") - Vehicles still emit 51% of carbon monoxide, 34% of oxides of nitrogen and 34% of Volatile Organic Compounds - Vehicles are responsible for 33% of carbon dioxide emissions: this is the primary contributor of global warming The air pollution - Vehicles have become a necessity, no longer a luxury - Everyone is aware of the following costs: tune ups, oil changes, fluid top-offs, gasoline - The environmental costs of automobiles have been accumulating for centuries - The major environmental costs are: air and water pollution - Environmental costs of autmobiles are extensive - The major unaccounted costs of automobiles are air and water pollution - These emissions affect our environment (global warming) and our health (respiratory problems) - The average person is cognizant about the economic cost of automobile but rarely think about the implacations to our environment The water contamination Thank you for your attention! - 1/3 of the total environment impact occurs before the car is finished - 1 car produces 29 tons of waste and 1 207 millions cubic yards of polluted air - Impact due to the extraction process of lead, iron, petroleum and other raw materials to construct pieces necessary to the production process
Transcript: Non Value Added Activites Activity Possible Activity Drivers Not willing to pay Moving Materials Inspecting Components Value Added Activites Number of defective units - An incentive is created for workers to increase efficiency and reduce waste. - This behavior is beneficial to the company as it helps to reduce their costs in buying materials for the product. Warranty hours - An incentive is created where workers are given a limited time to fix the defective parts and if they exceed the time limit, action will be taken. - This behavior is beneficial as workers will focus on their work and reduce waste, thus reduce the expenses of the business. Activity Value Justification Following are the 5 activities with possible activity drivers:- For setting up equipment Root Causes and Improvements Combining processes, locating work places closer. Defect-free Materials from Suppliers or Improved Employee Training. Activity Possible Activity Drivers Setting up equipment Setup time, Number of setups Performing warranty work Warranty hours, Number of defective parts Welding subassemblies Welding hours, Subassemblies welded Moving materials Number of moves, Distance moved Inspecting components Hours of inspection, Number of defective components Long set up time required. Defect Materials or Improper Employee Training. Long time for welding completion. For inspecting components For moving materials Problem 12-18 Joseph Fox Describe the behavior that each activity driver will encourage, and evaluate the suitability of that behavior for the company's objective of becoming more competitive In charge of a project to install an activity-based cost management system Assessing Value Content Inefficient Process Design. Inability to produce a good quality product Value Added Non Value Added Value Added Non Value Added Non Value Added For each activity, assess the value content and classify each activity as value-added or non-value-added (justify the classification). Identify some possible root causes of each activity, and describe how this knowledge can be used to improve activity performance. For purposes of discussion, assume that the value-added activities are not performed with perfect efficiency. 4 Manufacturing Process (Change of state). Possible to prevent warranty if production was done properly. Manufacturing Process (Change of state). Waste of time and resources for moving of materials. Only checks state of product (Change of state) Barizah Mustapa & Chua Cze Jia And also under the conditions:- setup time - An incentive is created for workers to reduce setup time up to zero. - Beneficial to the company as it reduces their costs in terms of paying the workers' overtime payments. Number of setups - An incentive is created where each worker will have a fixed number of setups. - Beneficial to the company as it improves efficiency and in a way, motivates the employees in terms of giving trust and responsibility. 1 Value or Non Value Added Activity Setting Up Equipment Performing Warranty Work Welding Subassemblies 3 Number of defective components - An incentive is created such as giving rewards so that the workers will try to work efficiently. - This will reduce the number of defective products to be produced. Hence, this beneficial behavior will reduce the costs in terms of inspecting the products. Hours of inspection - An incentive is created where there will be a limit for the number of hours for inspection for each month. - This will reduce the business' expenses in terms of paying workers to do the inspection. Number of moves - An incentive is created where the managers can plan a schedule of moving the products to the same and near-by place. - This will reduce the transportation cost in terms of fuel and at the same time, improve the efficiency of the company, thus, this behavior is beneficial to the company Distance moved - An incentive is created where the company will limit the number of kilometers drive for each month. - This will also reduce the transportation costs in terms of fuel, hence, this is beneficial to the company. Thank you for listening Change of state Change of state not possible with previous activities Enable other activity to be preformed Activity Root Causes Improvements What is the difference between an activity driver and a cost driver? In answering the question, describe the purpose of each type of driver For welding subassemblies Joseph and project committee are focusing on 3 additional implementation issues:- Identifying activity drivers Assessing value content Identifying cost drivers (root causes) 5 Welding hours - An incentive is created where workers will try to reduce the welding hours up to zero. - This behavior is beneficial to the company as it also reduces their costs in terms of paying the workers' overtime payments. Subassemblies welded - An incentive is created where there will only be a selected amount of product to be welded. - Beneficial to the company as it saves time and reduce
Transcript: Financial- Our start up costs are very low so during the introductory phase of our business our main financial concern will be survival. Social sustainability: Our business will encourage interpersonal relationships between employees and both customers (students) and suppliers(Universities) Organisational survival – Our operating system will underline some of the values of our company, which include, efficiency, professional growth, convenience and quality Structural sustainability: Our company focuses on learning and continuous improvement, and the development of new services. Cultural Sustainability – Within our company we want to build a sense of community and cohesion between employees. Community sustainability : We aim to create a community of students who value our product and consider it the standard format of application Societal – Since we are targeting students, the future generation; we aim to transmit values such as social justice, global rights....
Transcript: By: Laura Sofia Ruiz Gonzalez Leidy Johana Palacios Ospina Cost accounting systems ACCOUNTING COST ACCOUNTING COSTS BRANCH OF MANAGEMENT ACCOUNTING WHICH IS RELATED TO THE ACCUMULATION AND THE ANALYSIS OF COST INFORMATION FOR INTERNAL USE IN THE VALUATION OF INVENTORIES. PLANNING, CONTROL AND DECISION MAKING SYNTHESIZES AND REGISTER THE COSTS OF A COMPANY SO THAT THEY CAN BE ME ASURED AND CONTROL. THE RESULTS OF EACH ONE OF THEM THROUGH THE OBTAINING OF TOTAL AND UNIT COSTS. MANAGEMENT ACCOUNTING MANAGEMENT ACCOUNTING Is the information system designed to meet the internal needs of the company. Facilitates decision making and measurement of actions of the elements of the organization in relation to the plans and budgets established by it. HISTORY OF COST The emergence of cost accounting can be found before the Industrial Revolution. This cost system was used by some European industries between the years 1485 and 1509. In 1778, auxiliary books began to be used in all the items related to the cost of the products, such as wages, work materials and delivery dates. HISTORY OF COST DEVELOPMENT Approximately between the years 1890 and 1915, cost accounting managed to consolidate an important development, since it designed its basic structure, integrated the cost records into the accounts in countries such as England and the United States, and opted concepts such as: establishments of procedures for the distribution of indirect manufacturing costs, adaptation of reports and records for internal and external users, valuation of inventories, and estimation of costs of materials and labor. ACCOUNTING AS A TOOL The accounting began to be understood as a planning and control tool, which demanded the need to create new ways to anticipate the simple historical economic facts. Some reasons that show it are: The development of the railways. The value of the fixed assets used by the companies that made appear the need to control the indirect costs. The size and complexity of companies in addition to the difficulties administrative problems they faced. The need to have a reliable tool that allowed them to set sale prices. CLASSIFICATION OF COST CLASSIFICATION OF COST ACCORDING TO THE AREA WHERE THEY ARE CONSUMEN PRODUCTION COSTS DISTRIBUTION COSTS ADMINISTRATION COSTS FINANCING COSTS ACCORDING TO YOUR IDENTIFICATION DIRECT INDIRECT ACCORDING TO THE MOMENT IN WHICH IT IS CALCULATED HISTORICAL PREDETERMINED ACCORDING TO THE MOMENT IN WHICH THE RESULTS ARE REFLECTED PERIOD COSTS PRODUCT COSTS ACCORDING TO THE CONTROL YOU HAVE OVER YOUR CONSUMED CONTROLLABLE COSTS UNCONTROLLABLE COSTS ACCORDING TO THE TYPE OF PAYMENT IN WHICH IT INCURS DISBURSABLE COSTS OPORTUNITY COSTS ACCORDING TO YOUR BEHAVIOR FIXED COSTS VARIABLE COSTS SEMI-VARIABLE COSTS MIXED COSTS STAGGERED Cost accounting system: JOB ORDER COSTING IS A COST ACCOUNTING SYSTEM THAT ACCUMULATES MANUFACTURING COSTS SEPARATELY FOR EACH JOB. IT IS APPROPRIATE FOR FIRMS THAT ARE ENGAGED IN PRODUCTION OF UNIQUE PRODUCTS AND SPECIAL ORDERS. FOR EXAMPLE, IT IS THE COSTING ACCOUNTING SYSTEM MOST APPROPRIATE FOR AN EVENT MANAGEMENT COMPANY, A FURNITURE PRODUCER, A PRODUCER OF VERY HIGH COST AIR SURVEILLANCE SYSTEM, ETC. FEATURES OF JOB COSTING A) IT IS A SPECIFIC ORDER COSTING. B) THE JOB IS CARRIED OUT OR A PRODUCT IS PRODUCED TO MEET THE SPECIFIC REQUIREMENTS OF THE ORDER. IT MAY BE RELATED TO SINGLE UNIT OR A BATCH OF SIMILAR UNITS. C) IT IS CONCERNED WITH THE COST OF AN INDIVIDUAL JOB OR BATCH REGARDLESS OF THE TIME TAKEN TO PRODUCE IT, BUT NORMALLY SHORT DURATION JOBS. D) COSTS ARE COLLECTED TO EACH JOB AT THE END OF ITS COMPLETION. THE END OF THE ACCOUNTING PERIOD. E) THE COSTS OF EACH JOB ARE ASCERTAINED BY ADDING MATERIALS, LABOR AND OVERHEADS. F) ONLY PRIME COST ELEMENTS ARE TRACEABLE, AND THE OVERHEADS ARE APPORTIONED TO EACH JOB ON SOME APPROPRIATE BASIS AND SOMETIMES IT IS DIFFICULT TO SELECT A SUITABLE METHOD OF ABSORPTION OF OVERHEADS TO INDIVIDUAL JOBS. G) STANDARDIZATION OF CONTROLS IS COMPARATIVELY DIFFICULT AS EACH JOB DIFFERS, AND MORE DETAILED SUPERVISION AND CONTROL IS NECESSARY. H) WORK-IN-PROGRESS MAY OR MAY NOT EXIST AT THE END OF THE ACCOUNTING PERIOD. * JOB ORDER COSTING OFFERS A DETAILED ANALYSIS OF THE COSTS OF MATERIALS, LABOR COST AND OVERHEADS BY FUNCTIONS AND NATURE. * JOB ORDER COSTING MAKES IT POSSIBLE TO APPRAISE THE PROFITABILITY OF A JOB. * JOB ORDER COSTING FACILITATES THE ESTIMATION OF THE COST OF A SIMILAR JOB. * JOB ORDER COSTING ALLOCATES OVERHEADS ON THE BASIS OF A PREDETERMINED RATE. * JOB ORDER COSTING MAKES EASY TO IDENTIFY SPOILAGE AND DEFECTS TO TAKE CORRECTIVE ACTIONS. * JOB ORDER COSTING EVALUATES EFFICIENCY OF DIFFERENT TYPES OF JOBS WITH COST RECORDS BY USING STATISTICAL TECHNIQUES. ADVANTAGES OF JOB ORDER COSTING * JOB ORDER COSTING NEEDS A GREAT DEAL OF CLERICAL WORK IN RECORDING MATERIAL ISSUE, WAGE COMPUTATION AND PAYMENT AND OVERHEAD CHARGES. * ASCERTAINMENT OF OVERHEAD RATE NEEDS ALLOCATION AND APPORTIONMENT OF THE OVERHEADS
Transcript: Ain't No Thing But a Chicken Wing Revenues Production DM Usage DM Purchases Total Labor COGS Operating Income Jamie Stansberry and Rachel Weinberg Cost Flow Method Employees and hours Production and Sales Background
Transcript: COST ACCOUNTING INTRODUCTION Accounting Accounting provides timely and accurate financial information concerning the activities of an enterprise to a diverse group of people. Topic 1 Financial Accounting Title Financial accounting is concerned with recording business transaction in the books of account for the purpose of determing the profit or loss and financial position of the business. Financial Accounting Preparing profit &loss account and Balance Sheet Title Cost Accounting Title Cost Accounting is a branch of accounting which specialises in providing information about the detailed cost of products or services being supplied by the undertaking. Cost Accounting Analysing cost for control and maximising efficiency Title Management Accounting Title A system of collection and presentation of relevant economic information relating to an enterprise for planning, controlling and decision making. Management Accounting Assisting management for planning, decision making and control Title Limitations of Financial Accounting Topic 2 1. Shows only overall performance. 2. Historical in nature 3. No performance appraisal 4. No material control system 5. No labour cost control 6. No proper classification of costs 7. No analysis of losses 8. Inadequate information for price fixation 9. No cost comparison 10. Fails to supply useful data to management Cost Accounting Topic 3 Cost accounting is the process of accounting for costs from the point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centres and cost units. In its widest usage, it embraces the preparation of statistical data, the application of cost control methods and ascertainment of profitability of activities carried out or planned. Cost Accounting Text " Cost accounting means a specialised application of the general principles of accounting in order to ascertain the cost of producing and marketing any unit of manufacture or of carrying out any particular job or contract." --L.C. Cropper Costing Title " the proper allocation of expenditure and involves the collection of costs for every order, job, process, service or unit." -- Wheldon Cost Accountancy Title " the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability. It includes the presentation of information derived therefrom for the purposes of managerial decision making." --CIMA Objectives and Function of Cost Accounting Topic 4 1. Ascertainment of cost and Profit 2. Cost control and cost reduction 3. Guide to business policy 4. Determination of selling price Chart Chart Timeline Timeline YEAR Advantages of Cost Accounting Topic 5 1. Reveals Profitable and unprofitable activities 2. Helps in cost control 3. Helps in decision making 4. Guides in fixing selling prices 5. Helps in inventory control 6. Aids in formulating policies 7. Helps in cost reduction 8. Reveals idle capacity 9. Check the accuracy of financial accounts 10. Prevents frauds and manipulation Scope Text 1. Costing 2. Cost book keeping 3. Cost analysis 4. Cost control 5. Cost reports 6. Cost audit Limitations 1. It is unnecessary 2. It is expensive 3. It is inapplicable 4. It is a failure Text ESSENTIALS OF A GOOD COST ACCOUNTING SYSTEM 1. Suitability 2. Specially designed system 3. Support of executives 4. Cost of the system 5. Clearly defined cost centres 6. Controllable costs 7. Integration with financial accounts 8. Continuous education 9. Prompt and accurate reports 10. Avoid unnecessary details Title Thank You Title
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