beliefs Reality Why is a new cost management system needed? Why is the knowledge of the “true” cost of a product so important ? http://www.pitt.edu/~roztocki/abc/abctutor/index.htm (1 of 4)1/28/2005 5:20:20 AM Introduction to Activity Based Costing (ABC) Why is the knowledge of the “true” cost of a product so important ? (cont) Major factors for determination of market price Ways to determine object cost Total cost for a cost object Traditional Cost Accounting (TCA) TCA in a company
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| COST ACCOUNTING AREA: CONTROL IMBA NUMBER OF SESSIONS: 20 PROFESSOR: SALVADOR CARMONA □ Ph.D (Accounting). Universidad de Sevilla. □ Last version, November 2006 COURSE DESCRIPTION A cost accounting system collects and classifies costs and assigns them to cost objects. The goal of a cost accounting system is to measure the cost of designing, developing, producing (or purchasing), selling, distributing, and servicing particular products or services. Cost allocation
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equipment, which is in the last year of its depreciable life. Department N’s equipment is about half depreciated. Department C’s equipment is in the second year of its life. The budget prepared for each department in 2010 included the following costs, volumes, and overhead rates (given in millions of dollars): | A | B | C | Expected number of units | 73M | 73M | 55M | Fixed overhead | | | | General expense | $1.5M | $2.0M | $1.25M | Rent | $1.5M | $2.0M | $1.75M |
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Introduction Costs fall into two categories: direct and indirect. Direct costs are those costs which can be attributed to a specific final cost objective(s); alternatively, indirect costs are those costs which have no specific cost objective. An example of a direct cost might be the costs associated with salaries of "hands-on" personnel, e.g., engineers supporting a particular project. An indirect cost might be the office supplies those engineers use, the cost of rent on a facility in which
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manufacturing cycle efficiency of this process: MCE = (3+2)/200 = 2.5% Ex23.) a. Total support cost = $250,000 + $80,000 = $330,000 Partner hours = 4 x 2,000 = 8,000 Staff hours = 10 x 2,500 = 25,000 Total hours = 8,000 + 25,000 = 33,000 hours Support rate per hour = $330,000 ÷ 33,000 = $10 b. Total hours = 50 + 200 = 250 Total support cost = 250 x $10 = $2,500 c. Professional support rate per hour = $250,000 ÷ 33,000 = $7.58 (rounded)
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Cap 2. Job Order Costing Cost accounting involves the procedures for measuring, recording, and reporting product cost. From the data accumulated, companies determine the total cost and the unit cost of each product. The two basic type of cost accounting system are job order cost and process cost. Under a job order cost system the company assigns cost to each job or to each batch of goods. A company uses process cost system when it manufactures a large volume of similar products. Production
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Group I Paper 1: Accounting (100 marks) Paper 2: Law, Ethics and Communication Part I: Law (60 marks) Business Laws (30 marks) Company Law (30 marks) Part II: Business Ethics (20 marks) Part III: Business Communication (20 marks) Paper 3: Cost Accounting and Financial Management Part I: Cost Accounting (50 marks) Part II: Financial Management (50 marks) Paper 4: Taxation Part I: Income-tax (50 marks) Part II: Service Tax (25 marks) and VAT (25 marks) Group II Paper 5: Advanced Accounting (100 marks) Paper
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Homework Chapter 3 # 13 Required: a. Calculate the cost per equivalent unit for materials & conversion costs. Materials = $446,970 / (45,000 + 2,550)= $9.40 Conversion Cost = $407,880 / (45,000 + 1,350) = $8.80 b. Calculate the cost of items completed during November. 45,000 x $18.20 = $ 819,000… $18.20 came by adding $9.40 + 8.80 c. Calculate the cost of ending Work in Process Material Cost: (2,550 x $9.40) = $23,970 Conversion: (1,350
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respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is: A. the same as the number of units put into production. B. less than the number of units put into production. C. the same as the number of units completed. D. less than the number of units completed. 2. Assume there was no beginning work in process inventory and the ending work in process inventory is 70% complete with respect to conversion costs. Under the weighted-average
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C H A P T E R F I V E INTRODUCTION TO COST MANAGEMENT Activity-Based Costing and Management After studying this chapter, you should be able to . . . 1. Explain the strategic role of activity-based costing 2. Describe activity-based costing (ABC), the steps in developing an ABC system, and the benefits and limitations of an ABC system 3. Determine product costs under both the volume-based method and the activity-based method and contrast the two 4. Explain activity-based management (ABM)
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