basic cost management concept

7/23/2019 Basic Cost management concept

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2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in hole or in part, e!cept "or use as per#itted in a license distributed ith a certain product orservice or otherise on a passord$protected ebsite "or classroo# use.


C%A&'(R 2

)A*+C C*' MA-A(M(-'C-C(&'*

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MA-A(M(-', (HANSEN/MOWEN


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C%A&'(R 2 )(C'+(

1. 3escribe a cost #anage#ent in"or#ationsyste#, its obectives, and its #aorsubsyste#s, and indicate ho it relates to

other operating and in"or#ation syste#s

2. (!plain the cost assign#ent process

. 3e5ne tangible and intangible products,

and e!plain hy there are di6erentproduct cost de5nitions


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C%A&'(R 2 )(C'+(

4. &repare inco#e state#ents "or#anu"acturing and service organi7ations

8. (!plain the di6erence beteen traditionaland conte#porary cost #anage#entsyste#s


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A *9*'(M* /RAM(:R;

System: a set o" interrelated parts thatper"or#s one or #ore processes toacco#plish speci5c obectives

:or


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A *9*'(M* /RAM(:R;

Accounting Information Systems

&rovides in"or#ation to people in a co#pany

Collects, classi5es, su##ari7es, analy7es, and

#anages data to provide in"or#ation to users+nputs are usually econo#ic events

'he operational #odel is critically involved ith theuser o" in"or#ation

'o #aor subsyste#s 'he 5nancial accounting in"or#ation syste#

'he cost #anage#ent in"or#ation syste#

LO-1


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(=%+)+' 2.2>&(RA'+-AL M3(L / A-ACC?-'+- +-/RMA'+- *9*'(M

LO-1


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2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in hole or in part, e!cept "or use as per#itted in a license distributed ith a certain product orservice or otherise on a passord$protected ebsite "or classroo# use. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in hole or in part, e!cept "or use as per#itted in a license distributed ith a certain product orservice or otherise on a passord$protected ebsite "or classroo# use.

A *9*'(M* /RAM(:R;

Financial Accounting InformationSystem

&ri#arily concerned ith producing outputs "or

e!ternal users

Inuts: ell$speci5ed econo#ic events

!rocesses: rules and conventions established bythe *(C, /A*), and +A*)

Oututs: 5nancial state#ents "or e!ternal users

LO-1


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A *9*'(M* /RAM(:R;

"ost Management Information System

&ri#arily concerned ith producing outputs "orinternal users using inputs and processes needed

to satis"y #anage#ent obectivesInuts an# rocesses: set by #anage#ent@ notbound by e!ternally i#posed criteria

&rovides in"or#ation "or three broad obectives

Cost services, products, and other obects

&lanning and control

3ecision #a


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A *9*'(M* /RAM(:R;

$alue c%ain: set o" activities reuired todesign, develop, produce, #ar


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(=%+)+' 2.>'%( AL( C%A+-

LO-1


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A *9*'(M* /RAM(:R;

&elations%i to Ot%er OerationalSystems an# Functions

An integrated cost #anage#ent syste#

receives in"or#ation "ro# and providesin"or#ation to all operational syste#s

Enterrise resource lanning systems:integrative, cross$"unctional syste#s thatcoordinate in"or#ation to "acilitate ti#ely andaccurate reporting and decision #a


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A *9*'(M* /RAM(:R;

'i(erent Systems for 'i(erent !uroses

"ost accounting information system:assigns costs to individual products and services

and other obects o" interest to #anagers

Oerational control information system:provides accurate and ti#ely "eedbac(=AM&L(* / &R3?C'C*' 3(/+-+'+-*

LO-


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&R3?C' A-3 *(R+C( C*'

!ro#uct "osts an# E)ternal Financial&eorting

!ro#uction 0or ro#uct costs:costs

associated ith #anu"acturing goods orproviding services

Nonro#uction costs: costs associated

ith the "unctions o" selling andad#inistration

LO-


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&R3?C' A-3 *(R+C( C*'

!ro#uct "osts an# E)ternal Financial &eorting

'irect materials: #aterials traceable to the goods orservices being produced

(!a#pleB the cost o" ood in "urniture

'irect la+or: labor that is traceable to the goods orservices being produced

(!a#pleB ages o" asse#bly$line or


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&R3?C' A-3 *(R+C( C*'


!rime cost: su# o" direct #aterials cost and

direct labor cost"on.ersion cost: su# o" direct labor cost andoverhead cost

LO-


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&R3?C' A-3 *(R+C( C*'


-onproduction costs are divided into to categories

Mar2eting 0selling costs: costs necessary to#ar


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&R3?C' A-3 *(R+C( C*'


Mar


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(=%+)+' 2.D>&R3?C'+- A-3--&R3?C'+- C*'*

LO-


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(='(R-AL /+-A-C+AL *'A'(M(-'

Income Statement: Manufacturing Firm

+nco#e state#ent prepared "or e!ternal parties"ollos the standard "or#at

Re"erred to as absorption$costing inco#e or "ull$costing inco#e because all #anu"acturing costsare "ully assigned to the product

(!penses are separated according to "unction and

then deducted "ro# revenues to arrive at operatinginco#e

'o #aor "unctional categories o" e!pense are costo" goods sold and operating e!penses

LO-3


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(='(R-AL /+-A-C+AL *'A'(M(-'

"ost of goo#s manufacture#: representsthe total #anu"acturing cost o" goodsco#pleted during the current period

nly costs assigned to goods co#pleted are the#anu"acturing costs o" direct #aterials, directlabor, and overhead

3etails o" this cost assign#ent are given in asupporting schedule, called the state#ent o" costo" goods #anu"actured

"ost of goo#s sol#: #anu"acturing cost o"the units that ere sold during the period

LO-3


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'RA3+'+-AL A-3 AC'++'9$)A*(3C*' MA-A(M(-' *9*'(M*

ra#itional "ost Management Systems

'raditional Cost Accounting

Assu#es that all costs can be classi5ed as 5!ed or

variable ith respect to changes in the units or volu#e ?ses only unit$based activity drivers to assign costs

'raditional Cost Control

Assigns costs to organi7ational units

%olds the organi7ational unit #anager responsible "orcontrolling the assigned costs

'races costs to individuals ho are responsible "orcosts

LO-4


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'RA3+'+-AL A-3 AC'++'9$)A*(3C*' MA-A(M(-' *9*'(M*

Acti.ity-5ase# "ost ManagementSystemsActivity$)ased Cost Accounting

(#phasi7es tracing over allocation ?ses both unit$ and non$unit$based activity drivers

Activity$)ased Cost Control

/ocuses on accountability "or activities rather thancosts

Activity$ based #anage#ent EA)MF "ocuses on

i#proving custo#er value

LO-4


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(=%+)+' 2.G>AC'++'9$)A*(3MA-A(M(-' M3(L

LO-4


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2014 Cengage Learning All Rights Reserved May not be copied scanned or duplicated in hole or in part e!cept "or use as per#itted in a license distributed ith a certain product or 2014 Cengage Learning All Rights Reserved May not be copied scanned or duplicated in hole or in part e!cept "or use as per#itted in a license distributed ith a certain product or

(=%+)+' 2.H>CM&AR+*- / 'RA3+'+-AL A-3AC'++'9$)A*(3 C*' MA-A(M(-' *9*'(M*

LO-4END OF CHAPTER 2

basic cost management concept

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